Boeing, Airbus, and Bombardier

Vincent J. Curtis

1 Mar 2018

Besides announcing that the interim replacements for used up Canadian CF-18s would be used up Australian F/A-18s, the purpose of the DND press conference of Dec 11^th, 2017, was for the Federal government to publically invite bids on Canada’s Future Fighter Capability Project, or FFCP.  The deadline for submitting bids was Feb 9^th, 2018, and the qualified bidders were, unsurprisingly, Boeing, Lockheed-Martin, Airbus, Dassault, and Saab.

These suppliers were invited to submit proposals for the replacement of Canada’s fleet of CF-18 aircraft with 88 new-builds.  In a “competition,” the Trudeau government, or its successor, will evaluate the proposals for “cost, technical requirements, and economic benefits to Canada.”  Apparently, the Trudeau government is ambivalent about the differing technical merits between Gen 4 and Gen 5 fighters, considering them both of them to be more or less the same.  Perhaps it will come up with an ad hoc cost/benefit ratio between the two types.

Boeing, while participating, remains wary of the Trudeau government’s intentions.  In a press statement, Boeing says it “will continue to evaluate our participation in the FFCP as the Government of Canada outlines the procurement approach, requirements, and evaluation criteria…” while maintaining “…the Super Hornet is the low-risk, low-cost approach and has all the advanced capabilities the Royal Canadian Air Force needs now and well into the future.”

Boeing is not looking to burn any bridges, saying also that it “values Canada as a customer and supplier-partner…”

Airbus is part of the consortium that makes the Eurofighter Typhoon.  Boeing fell afoul of the Trudeau government when it asked a U.S Trade disputes panel to slap tariffs in the amount of nearly 300 percent on C-Series commercial jets made by Liberal favorite, Bombardier.  Before the panel even had a chance to reject Boeing’s suit, which it quickly did, Bombardier slipped the rights to make the jet to Airbus.  Bombardier’s jets will be made by Airbus in the United States, thus bypassing the rules governing importation regardless of the trade panel’s decision.

An Airbus bid would seem to have an inside edge with the Trudeau government through Airbus’s friendly commercial relationship with Bombardier.  The “economic benefits to Canada” angle could be met in Airbus’s bid by subcontracting assembly to Bombardier in Canada, with the parts being shipped in from Europe.

Boeing already supports some 2,000 jobs in Canada.  The “economic benefits to Canada” as a result of an FFCP contract could come about by placing an off-setting amount of work at its Winnipeg facility as the Block III Super Hornets rolled off the assembly line in St. Louis, as happened with the Boeing CC-177 Globemaster III transport and CH-147F Chinook helicopter purchases.

Because of Boeing’s suit against Bombardier, the Trudeau government went out of its way to publically embarrass Boeing executives, and cabinet members accused the company of being “harmful to Canada’s economic interests,” forgetting altogether the company’s longstanding workforce in western Canada.  The prospective evaluation of proposals baldly states that bidders so accused will stand at a “distinct disadvantage.”

A major weakness of Airbus’s entry is cost.  The Eurofighter Typhoon is an expensive aircraft to build, to operate, and to maintain - more than the Super Hornet.  The flyaway cost of one, at the moment, runs in the range of € 100 million, making the cost of the acquisition at least $13.5 billion Canadian.  As with the F-35, so with the Eurofighter Typhoon, you pay for capabilities you don’t really need and can’t afford to use.  Canada isn’t going to risk the loss of a $150 million aircraft to bust bunkers that cost little more than spadework and mud to build.  It would be foolhardy to do so, but you have to pay for that useless capability anyhow.

The “economic benefits to Canada” phrase can sometimes be a pleasant way of saying “graft.”  It is cheapest of all to build something on the production line presently operating.  To create an entirely new production line incurs capital costs over and above the cost of building the next 88 aircraft coming off the line.  Canada is not going to get into the business of supplying the world with fighter aircraft, and so the “economic benefit” of having Bombardier assemble Typhoons from parts is merely a way of having Canadian taxpayers shovel additional money into Bombardier and create some temporary jobs in Quebec.  The economic ‘benefit’ simply doesn’t last.

A Boeing proposal that incorporated offsetting work in Winnipeg has the inherent savings of avoiding unnecessary capital costs and the cost of teaching new workers a new job.

Because of Airbus’s links to Bombardier, a Eurofighter Typhoon assembled by Bombardier could have the edge in the “competition” due to its higher political visibility.  If the Trudeau government purchased new Super Hornets instead of refurbishing old Australian planes, it could either reduce the scale of the FFCP from 88 to 70, or saved itself the cost of refurbishment, which now is estimated to be between $500 million and $1.5 billion.  It will take three years of analysis before we find out whether the Trudeau government has learned anything about technical merits, cost, and economics.

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This report is updated from a report of Feb 26th.