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Brazil takes issue with CSeries funding in US-supported move

Brazil's government has formally raised questions at the World Trade Organization (WTO) about Canadian funding of the Bombardier CSeries programme, in a move that was supported by the US government, FlightGlobal understands.

The questions were posed to Canada at a recent WTO subsidies committee meeting on 25 October. FlightGlobal understands that the US government was supportive of Brazil's inquiry and encouraged Canada to respond to the questions.

The move by Brazil at the WTO follows staunch opposition from Embraer to Canadian funding for the CSeries programme, which landed orders from Delta Air Lines and Air Canada earlier this year after struggling to fill its orderbook. Bombardier had booked a $500 million loss provision on CSeries deals, including the Delta and Air Canada orders, in its second quarter results.

The Canadian airframer had received a $1 billion investment from Quebec's government for the CSeries programme and is in talks to secure an additional $1 billion investment from Canada's federal government.

In response to FlightGlobal, a Bombardier spokesperson says: "We respect and abide by all international trade agreements and guidelines and are confident that Quebec’s equity investment in the CSeries does, and any future Federal investment will, comply with all international trade requirements."

The role of government funding was the main subject of Brazil's questions posed to Canada at the WTO meeting, documents show.

Brazil requested information related to the status of federal funding to the CSeries programme, and questioned the Quebec investment: "Why is the government of Quebec providing the investment rather than commercial investors?"

Embraer has maintained that the government funding to Bombardier is unfair and violates WTO rules. On a 31 October earnings call, Embraer's chief executive Paulo Cesar Silva says of the loss-making CSeries deals: "The government of Canada... is banking this gap."An Embraer spokesperson says that the funding to Bombardier came with "more favourable conditions than the company could obtain on the market".

"Given their intensity and conditions, these subsidies distort the sector’s international competition and infringe the multilateral rules of commerce," he tells FlightGlobal.

It is not immediately clear if US aerospace manufacturers have urged US government officials to support Brazil in their concerns. A Boeing spokesperson declines to comment on the issue. Boeing and Airbus have been embroiled in a long-standing dispute at the WTO over unfair subsidies.

Embraer's Silva told analysts on the 31 October earnings call that he does not expect Canada's government to proceed with the additional $1 billion investment. "If they do of course we'll be very rightly disappointed."

However, he also acknowledges that taking action through the WTO is unlikely to result in a prompt resolution. "It's not efficient," says Silva."It's going to take six to eight years... Hopefully there will be no need for that."

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