New aircraft sector understanding could arise from CSeries spat

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Aircraft exporting countries will gather next week in Paris for an Organization for Economic Cooperation and Development (OECD) meeting that could pave the way for a new aircraft sector understanding (ASU) agreement in the industry.

At the heart of the discussion will be a dispute over Canada's proposal for the home-grown, 110/130-seat Bombardier CSeries twinjet to be classified as a smaller aircraft, a distinction that would permit the government to take advantage of more beneficial export credit financing.

Airbus and Boeing appear united in their opposition to such a classification for the Pratt & Whitney PW1000G geared turbofan-powered CSeries, which could yet prove a competitor to their highly successful narrowbody programmes. "If there's one thing Airbus and Boeing can agree on, it's this, Bombardier's position clearly would be a distortion of competition," Airbus chief operating officer John Leahy is quoted as telling the Wall Street Journal.

But a new ASU agreement, which would replace a pact brokered in 2007, appears to be in the works. "It is our understanding that the OECD has definitely moved away from the consideration of the classification of any new aircraft, including the CSeries, for the purposes of the ASU," says Bombardier.

"The OECD is starting a process - first meetings to be held in February - to review the existing ASU with the goal to revise and adopt a new ASU which makes no distinction between categories of aircraft and instead adopt a unified pricing model for all aircraft on the same basis in order to ensure a level playing field. The goal is to have a new ASU adopted by all OECD members by the end of 2010," it adds.

Brazil will be among the parties actively participating in next week's OECD meeting. While declining to give Embraer's position on Canada's financing proposal, company executive vice-president airline market Mauro Kern says: "It's a complex discussion. Boeing and Airbus have their own positions for this aircraft sector understanding."

Embraer is in the process of gauging market interest for a stretch of its E-195, informally dubbed the E-195X, as well as clean-sheet aircraft designs.

Since Bombardier's launch of the CSeries programme in July 2008, the Canadian airframer has secured firm orders for just 50 CSeries aircraft. But the manufacturer has full confidence it will secure more orders for the twinjet as the economy rebounds.

"Historical data establishes a relationship between GDP [gross domestic product] growth and airline passenger demand. By extension, GDP growth is also a driver of airline financial health and consequently aircraft order activity. It is therefore not surprising that aircraft orders were soft in 2009 as airlines focused their attention on short-term measures to cut capacity and protect balance sheets," says Philippe Poutissou, vice-president of marketing, Bombardier Commercial Aircraft.

"As with previous cycles, we reasonably expect order activity to pick-up as GDP growth returns."

Meanwhile, Bombardier's commitment to the CSeries programme remains unflinching. "The CSeries is a real programme, making a real difference in aviation today. With firm orders and a business case that speaks specifically to the market window that has not been addressed - the 100- to 149-seat market," says a Bombardier spokesman.

"It is getting a lot of attention, so instead of taking about what we might do, we are making a $3.5 billion investment and we're doing what we're going to do to accomplish what we set out to do."