Embraer Supports Brazil’s WTO Subsidy Complaint Withdrawal

Embraer has signaled its support for Brazil’s decision to withdraw a complaint before the WTO over Canada’s support for the Bombardier C-Series program. While the support may come as a surprise (especially since Brazil filed the complaint to support Embraer), the manufacturer has laid out its reasons. Here is Embraer’s strategy to create a level playing field in aviation subsidies.

Embraer
Embraer is searching for new ways to combat unfair state subsidies to aerospace manufacturers. Photo: Embraer

Withdrawn

In a statement yesterday, Embraer supported Brazil’s decision to withdraw an ongoing complaint before the WTO. Brazil first filed a challenge with the WTO against Canada in February 2017, citing the $3 billion given to the Bombardier C-Series program as being illegal subsidies that distorted the market.

However, the market has shifted rapidly since the complaint was first filed against Canada. Airbus’ acquisition of the C-Series program (now known as the A220) and opening of new production lines meant a ruling would no longer have the same effect Embraer once hoped.

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A220-300 Airbus Demonstration Tour in Asia - Yangon
Embraer argued that the deep subsidies to the C-Series distorted the market unfairly against them. Photo: Airbus

In a statement, Embraer said,

“After Bombardier exited the Commercial Aviation segment and transferred the C-Series program (now called A220) to Airbus, which has a second assembly line in the United States, the trade dispute against Canada at the WTO is no longer the most effective means to achieve Brazil’s and Embraer’s goal of re-establishing a level playing field in this sector.”

Competition

Embraer is now looking to other avenues to correct the effect of subsidies. Organizations like the OECD’s Aircraft Sector Understanding could provide other means to solving these disputes. However, the dispute signals an underlying competiton between the A220 and Embraer’s E-jet family.

The A220 has had a strong few years, with orders for the jet ramping up globally since Airbus’ acquisition of the program. As of today, Airbus has racked up 630 orders for the jet, including major commitments from Delta, JetBlue, and Air France. This growing dominance threatens Embraer’s position as a market leader in the regional jet market.

Embraer E175
The A220 is a direct challenger to the new E2 lineup of the E195 and E175. Photo: Embraer

Embraer has been heavily marketing its E195-E2 and E190-E2s, the latest iteration of the E-jet family. Aside from having a strong track record and fleet integration, the lower price of the E2 family could be a strong incentive for airlines.

Playing out

The A220 has had its fair share of disputes and opposition, including Boeing famous anti-dumping petition to the US government. However, as the regional jet soars in popularity (especially during the pandemic), Embraer and others are quickly trying to grow their footprints.

Envoy Air American Airlines Embraer ERJ-145
Embraer remains a popular manufacturer and is integrated in fleets globally. Photo: Getty Images

2020 was particularly hard on Embraer after its planned deal with Boeing fell through. The Brazilian manufaturer was forced to institute workforce cuts and saw deliveries fall as it reeled from the failed deal. With 2021 signaling higher demand, Embraer is working hard to return to its growth track.

What do you think about Embraer’s move? Can the A220 subsidies be addressed now? Let us know in the comments.

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