In mid October, Bombardier a maker of airplanes essentially gave the division to Airbus to fend off a fight with Boeing. To provide perspective, the next time you fly look to see who the manufacturer of the aircraft is. If you are in large plane, it will be either Boeing or Airbus. If you are on a feeder line, it can be either Bombardier, Airbus, Boeing or Embraer, these four companies are based in Canada, France, US and Brazil. Airbus and Boeing have the market for the planes which fly over the oceans; Bombardier was trying to move up to the Airbus and Boeing space. With President Trump in office talking about American made jobs; Boeing decided to increase the price any US carrier would have to pay to buy Bombardier newest and latest planes (Delta has put in an order) and thus limiting the buyers and trying to drive Bombardier out of the space. The government regulators agreed with Boeing (all governments support their aircraft industry including Boeing receives about $15 billion in tax breaks a year and supports from the government) however the consideration was not Boeing but Bombardier and 280% tariffs were issued. (although Delta said they were not paying).

Then Bombardier did something unexpected, at least to Boeing, they made a deal with Airbus which has a plant in Alabama and can finish off planes for US content requirements. Airbus is Boeing ‘s competitor world wide and now in the 100 to 150 seat planes. For the passenger airline industry, Bombardier becoming a subsidiary of Airbus means one less competitor or typically higher prices for airlines.

Linking to dividend paying stocks, in this case Boeing used its influence to affect a competitor and tried to kill the competition. It either failed to see the alternatives left to Bombardier or did not see the alternatives. It must have been focused on one objective, have higher tariffs to make the plane expensive so it would not be sold in the US. The plane could be sold to other countries, but in the airplane business having a US customer helps sales in other countries (as a passenger, one would like to believe it is the higher regulatory requirements to operate the planes and if they pass the hours testing then it would be safe in other countries). To summarize, everyone has alternatives, some of them are harder to do, but we all have alternatives and companies can easily drive their customers and competition to doing something else. Be careful what you wish for when you target your competition.

There are more questions than answers, till the next time – to raising questions.