Boeing seeks talks with Canada over threat to scrap jet purchase: source

Boeing seeks talks with Canada over threat to scrap jet purchase: source

FILE PHOTO - A plane flies over a Bombardier plant in Montreal, Quebec, Canada on January 21, 2014. REUTERS/Christinne Muschi/File Photo

OTTAWA: Boeing Co's defense unit wants talks with Canadian officials as it tries to fend off a government threat to scrap the purchase of 18 Super Hornet jets, a source familiar with the situation said on Friday.

Canada suggested on Thursday it could ditch its plans to buy the jets if the United States backed Boeing's claims that Canadian plane maker Bombardier Inc dumped jetliners in the U.S. market.

"Boeing made the calculation that taking this action was worth the risk," said the source, who requested anonymity given the sensitivity of the situation. "However, Boeing military sales division is concerned and is seeking to communicate with Canadian government decision-makers to mitigate the possible impact to their Super Hornet sale."

If Boeing did indeed gamble that it could challenge Bombardier while sealing an order for fighter jets, the costs could be significant, analysts said.

Political sources say the Liberal government of Prime Minister Justin Trudeau is furious about Boeing's allegations.

Richard Aboulafia, aerospace analyst at Teal Group, said that although Boeing's complaint appears valid, "the secondary effects are disastrous".

He said Boeing could lose US$10 billion to US$20 billion in military sales to Canada, encompassing order for jets, helicopters and maritime surveillance planes.

Potential winners include rival makers of jets, such as Lockheed Martin Corp, Dassault Aviation SA, Airbus SE and Saab AB, analysts said.

The U.S. Commerce Department on Thursday launched an investigation into Boeing's claims.

"This is a strong shot across the bow to the United States to say 'Shut this thing down pretty damn quickly,' said a Canadian defense industry source.

Bombardier is based in the powerful province of Quebec, where the ruling Liberals say they need to pick up support to be sure of winning an election in October 2019.

Trudeau twice side-stepped questions about the threat when speaking to reporters on Friday in British Columbia.

Canada unveiled plans to buy the Super Hornets last November as a stop-gap measure while it prepared an open five-year competition to replace its aging fleet of 77 Boeing CF-18 fighter jets.

Defense analyst David Perry said one option for Ottawa would be to scrap the idea of a stopgap force and go straight to the permanent competition.

Military procurement in Canada is handled by both the ministers of defense and public works, neither of whom were immediately available for comment. Boeing said it would respond later in the day.

Boeing's defense unit is called Defense, Space & Security.

(Additional reporting by Alwyn Scott in Seattle; Editing by Bernard Orr and Lisa Shumaker)

Source: Reuters