Bombardier and the Canadian Government are claiming victory in their long battle with Embraer and the Brazilian Government over the subsidising of regional aircraft exports.

The Canadian manufacturer believes that a World Trade Organisation (WTO) ruling against Brazil's Proex export finance programme will give its de Havilland Dash 8 turboprop a price advantage over Embraer's RJ-135 37-seat jet.

Bombardier and Ottawa also say the WTO decision must be applied not only to future Embraer sales, but also to aircraft on order and not yet delivered - which could affect existing deals. Embraer confirms the WTO ruling, but says such decisions are "never retroactive" and that existing Proex-supported sales are legally binding.

Bombardier argues that Proex, an interest-rate equalisation programme designed to offset any higher financing costs for customers buying Brazilian products, has reduced the price for a 50-seat ERJ-145 by $2.5 million.

Montreal-based Bombardier accepts that "the damage may be done" in respect of its 50-seat Canadair Regional Jet (CRJ), but believes the removal of subsidies could boost sales of the Dash 8 by opening up a price difference between it and the ERJ-135.

The WTO also ruled against Canada, however, by outlawing regional aircraft loans totalling C$141 million ($93 million) made under the Technology Partnerships Canada (TPC) programme on the grounds that repayment was contingent on export success.

Some C$87 million has been provided for the CRJ-700 and C$54 million for the Dash 8-400 (above).

Funding from the so-called Canada Account - which provides finance to high-risk countries if it is in the interest of Canadian foreign policy - was disallowed. Bombardier says six Dash 8 sales since 1995 have involved such financing.

Ottawa has yet to decide whether to appeal, but says it should be relatively easy to adapt TPC to comply with WTO rules. Brazil plans to appeal while adapting Proex to render it "a valid instrument for sales financing", says Embraer boss Mauricio Botelho.

The WTO is to reveal details of its rulings in the next two weeks, after which the companies will have two months to appeal.

Should the appeals fail, the rulings must be implemented within 90 days.

Source: Flight International