For not only did it allow the financially strapped maker of “regional” jets to finally launch a line of larger fuel-efficient jets into the American market, but it also put Bombardier on a course to challenge Boeing and Airbus in the larger and more lucrative market for bigger planes.
Now, two years later, having failed to use their legal and political muscle to preserve their highly profitable duopoly, Boeing and Airbus have done what desperate duopolists invariably try to do — buy up their potential competitors. For reasons that are both legal and political, the aerospace giants are likely to get away with it.
There are, in fact, two duopolies in the commercial aircraft business. There is the market for large jets — roughly speaking, those with 140 to 400 seats and a range of 3,500 to 8,000 miles, dominated by Boeing and Airbus. And there is the market for smaller “regional” jets with 40 to 90 seats, used on shorter flights to secondary cities — a market dominated by Bombardier and Brazil’s Embraer. Until recently, there was little or no overlap in the two markets and the duopolies had settled into a comfortable, at times cooperative, coexistence. But when the world’s airlines started to show interest in buying planes with 100 to 150 seats, Bombardier and Embraer saw an opportunity to extend their product lines in ways that, for the first time, would put them in a position to steal business away from Boeing and Airbus, which had not fundamentally redesigned their smaller single-aisle planes in decades.
For Bombardier, development of its new C Series of planes took more time and more money — $6bn in all — than it had anticipated, requiring what amounted to a bailout from the governments of Canada and Quebec. Although Air Canada had placed an early order for the new jets, the leading U.S. airlines held back, partly out of concerns that Bombardier had spent so much developing the plane that it might not be around a decade later to offer training, parts, support and follow-on orders.
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