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After winning Trump's ear, Boeing gets victory in trade row

[CHICAGO] Boeing Co is making the best of its unlikely rapport with President Donald Trump.

The planemaker's latest victory came this week when the Trump administration slapped far larger duties on a competing Bombardier Inc jet than Boeing had requested in a trade spat with its Canadian rival. There's also been good news for the company's defense division as the Pentagon acquired the next Air Force One fleet last month and named Boeing a finalist for a US$62 billion missile-defense system.

It might have been hard to imagine that Boeing would enjoy such good fortune back on Dec 6, when President-elect Mr Trump scolded the company in a Twitter broadside for "out of control" costs on the presidential plane. But the attack provided a path for chief executive officer Dennis Muilenburg to establish a rare, direct channel with the commander-in-chief that continues to benefit the largest US exporter as it navigates a fiercely competitive market.

"It ended up opening up some communication lines," Mr Muilenburg recalled at a forum in Washington on Wednesday. "We took that seriously." It's an example of how Boeing, under Mr Muilenburg's leadership, hasn't hesitated to embrace unconventional tactics in its dealings with competitors, suppliers, customers - and even a US president.

While there's always the chance that the strategy could backfire, the approach has largely been successful. The Chicago-based company has been the best performer on the Dow Jones Industrial Average this year, with shares up 63 per cent. They traded at US$253.84 at 1:58pm in New York on Friday.

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Boeing has stood out from other US companies in the way it has dealt with Mr Trump. After the uproar over the president's comments about protesters in Charlottesville, Virginia, CEOs from Merck & Co, Under Armour Inc and other companies spoke out or resigned from Mr Trump's corporate advisory panels. Both Boeing and Mr Muilenburg made no comment.

The trade spat has thwarted the US expansion of Bombardier's C Series, a technologically advanced aircraft that over the longer term poses a threat to the 737 jetliner, Boeing's largest source of profit. While the case winds through a review process, no US carrier is likely to risk duties similar to the estimated penalty of about US$3.4 billion assessed for the 75 Bombardier jets ordered last year by Delta Air Lines Inc, said aerospace analyst Seth Seifman of JPMorgan Chase & Co.

Boeing is looking decades ahead "and thinking about more competition, not only from Canada but also from China and Russia, where programs also benefit from state support," Mr Seifman said in a note to clients. "In the meantime, Boeing is likely to vigorously pursue this case against Bombardier to show that it's serious about countering aircraft industry government support." Other countries have protested Boeing's strong stance. UK Prime Minister Theresa May lashed out at the planemaker after the US import duties were announced this week. Her Canadian counterpart, Justin Trudeau, has threatened to scrap a multibillion fighter-jet deal.

Boeing had long been a target of fiscally conservative Republicans before Mr Trump's surprise victory last year. Much of the criticism centres on the company's reliance on the US Export-Import bank to help finance multibillion-dollar jet orders and for the support State Department officials sometimes provide to sway transactions. Conservatives have long criticised the agency as an example of what they call "crony capitalism."

But Boeing has made the most of the objectives it shares with Mr Trump, a cheerleader for US manufacturing. Mr Muilenburg found the private Mr Trump happy to chat.

"He's a very eager listener," the CEO said. "He likes to engage and have dialogue and look at problems from different directions. He's willing to listen and open to seeing different views, and I found that to be constructive."

The conversation piqued the president's interest in a proposed upgrade of Boeing's F/A-18 Super Hornet, the capabilities of which the Pentagon is studying in comparison with those of Lockheed Martin Corp's F-35 stealth fighter. And the Air Force bought two so-called "white tail" 747 jumbos - aircraft built without a buyer - in lieu of more expensive custom-built planes in August.

Not everything has gone Boeing's way. The Export-Import Bank still isn't open for business, while about US$20 billion in airplane sales to Iran remain in limbo as Mr Trump questions a nuclear pact negotiated by the Obama administration.

Mr Muilenburg didn't publicly address Mr Trump's role in the trade dispute or why Boeing waited until this year to challenge Bombardier's April 2016 deal with Delta. But Boeing would have "filed a dumping complaint against Bombardier regardless of who is president," said Tim Neale, a spokesman for the US company.

The US Trade Representative has challenged the European Union's subsidies to Airbus SE in a trade case that has been winding through the World Trade Organization for more than a decade with support from presidents of both parties, Neale said by email.  "There's a basic principle at stake here, which is the obligation that trading nations have to play by the rules embodied in domestic and international trade law," Mr Neale said.

That Boeing brought the case in the first place surprised some in the industry. Delta is an important and powerful customer and Boeing no longer makes a plane in the 100-seat category being contested. Brazilian planemaker Embraer SA is already challenging Bombardier's subsidies with the World Trade Organization.

While Boeing savors its victory, the longer-term benefit remains unclear, aerospace analyst Richard Aboulafia said. The duties ultimately could be reduced as Bombardier, Canada, the UK and other parties press their appeals. And US airlines mulling the C Series aren't likely to look lightly on Boeing's interference.

"That's another example of tactics over strategy," Mr Aboulafia said. "The consequence will be to drive them straight into the arms of Airbus, because none of these guys like having their hands tied in negotiation."


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