December 4, 2017 / 9:32 PM / 2 years ago

UPDATE 1-Aeromexico eyes Delta's CSeries jet order amid U.S. trade spat -sources

(Adds details of proposed deal, background on trade dispute)

By Allison Lampert and Christine Murray

MONTREAL/MEXICO CITY, Dec 4 (Reuters) - Aeromexico has held preliminary talks to take some Bombardier CSeries jets orders from Delta Air Lines Inc, which owns a stake in the Mexican carrier, to avoid possible U.S. trade duties levied on the planes, two sources familiar with the matter said.

Mexico’s largest carrier, 49-percent owned by Delta, is considering taking an unknown number of the 75 CSeries planes ordered by Delta in 2016, one of the sources said. Delta’s CSeries deliveries, scheduled to begin in spring 2018, face a possible 300 percent U.S. duty stemming from a trade dispute with Boeing Co.

In October, Bombardier gave a controlling stake in the CSeries program to Airbus SE, which would enable assembly in the United States in a move it says will help bypass potential import duties.

Under the proposed Aeromexico deal, the single-aisle jets would be sold to Aeromexico and fly under the banner of the Mexican carrier which would not have to pay a U.S. duty, one of the sources added.

“It’s not a way for Aeromexico to fly for Delta,” the same source said. “But it keeps the planes within the Delta family.”

Aeromexico is now reviewing its fleet, a third source said, which is composed of Boeing and Brazil’s Embraer SA jets. The carrier received a presentation about the 110-to-130 seat CSeries last week, and is expected to receive another from Bombardier’s Brazilian rival, the source said.

Sources spoke on condition of anonymity as the talks are confidential. They cautioned that no final decision has been made and Aeromexico could still buy planes from Embraer.

Embraer and Bombardier both declined to comment. Aeromexico referred questions to Delta. Delta did not comment on any specific deal, but spokesman Morgan Durrant referred to recent remarks by the company’s CEO who said the carrier would not pay any duties, but still intended to “take the aircraft.”

An Aeromexico deal would offer a short-term solution to Bombardier and Delta in the trade dispute.

A U.S. trade agency is expected to decide in early 2018 on Boeing’s complaint that the Canadian company benefited unfairly from subsidies and dumped the 110- to 130-seat CSeries jets in the U.S. market below cost.

The case has fueled trade tensions between Canada and the United States and comes as the two countries, along with Mexico, are engaged in tense negotiations to modernize the North American Free Trade Agreement (NAFTA).

Bombardier has said it would assemble the CSeries jets destined for U.S. airlines at Airbus’ Alabama plant, which the two companies say would exempt them from duties.

Boeing has countered that the CSeries should still be subject to duties, even if the planes are assembled in the United States.

Reporting by Allison Lampert in Montreal and Christine Murray in Mexico City; Editing by Denny Thomas and Lisa Shumaker

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