Delta Air Lines (DL, Atlanta Hartsfield Jackson) has said it will refuse to pay a 300% tariff imposed by the US government on the import of Bombardier C Series aircraft. Speaking on a 3Q17 earnings call, Delta CEO Ed Bastian categorically ruled out paying the tax, saying that the decision from the US Department of Commerce “didn’t make a whole lot of sense.”
“We will not pay those tariffs,” Bastian said. “And that is very clear.”
Bastian added that Delta still intends to take delivery of the 75 aircraft, although there may be a delay as the tax issues are worked through.
“We intend to take the aircraft,” Bastian said. “I can’t tell you how it’s going to eventually work out. There may be a delay in us taking the aircraft as we work through the issues with Bombardier, who is being a great partner in this. We think that the aircraft needs to come to market, we believe it will come to market, and we believe Delta will get it at the agreed contractual price. We’re not going to be forced to pay tariffs or do anything of the ilk.”
Bastian acknowledged that the debate has gone beyond the aeronautics sphere and is being discussed at a political level. The Prime Ministers of Canada and the United Kingdom have weighed in, as the decision affects manufacturing workers in their countries.
The duties must still be approved by the US International Trade Commission (ITC), which will make a decision in early 2018. Bombardier and Delta are hopeful that the ITC will reject the tariff, as they claim that the import of the C Series will not materially affect Boeing – the originator of the complaint – which doesn’t offer any aircraft in the same size.
“Boeing competed very hard for the order, except they were competing with not their own product, but it was a Brazilian product, an Embraer product, that wasn’t even new. It was used,” Bastian said. “So as you look through this, and try to see how exactly a harm case is going to be developed, particularly to justify the type of tariffs that are being contemplated, to us it’s unrealistic. A bit nonsensical.”