Bombardier Wins Court Case Against Engine Supplier Honeywell
By Chris Loh
A court sided with Bombardier and its assertion that Honeywell was in breach of contract to provide the lowest price for engines.
On January 19th, a Quebec Superior Court judge ruled that Honeywell was in breach of its contract with Bombardier. Honeywell, the supplier of engines that propel Bombardier’s business jets, was contractually obligated to offer the Canadian planemaker the best price.
A dispute over engine costs
The dispute between Bombardier and Honeywell has been ongoing for years. Since the 1990s, Honeywell had been exclusively designing and building engines for Bombardier, with the planemaker investing heavily in Honeywell for engine development.
However, the special relationship between the companies has shifted over the years, with Honeywell eventually going on to supply HTF7000 engines not only to Bombardier and its Challenger business jets, but to rival firms such as Gulfstream, Embraer, and Textron (maker of Cessna business jets.
Due to this increase in business, it was alleged by Bombardier that Honeywell raised the price of its engines for Bombardier. This was in defiance of a contractual obligation to reduce costs over time and offer the best price. Bombardier claimed that Honeywell was selling engines to rivals on more favorable terms.
“With the arrival of competitors Bombardier’s relationship with Honeywell became strained…Bombardier’s market share for super mid-size jets fell as competitors entered the market, while Honeywell became the sole engine manufacturer for all four competing OEMs (original equipment manufacturers).” – Justice David Collier via The Financial Post
Aircraft which utilize the HTF7000 Series
- Bombardier Challenger 300 (HTF7000)
- Bombardier Challenger 350 (HTF7350B)
- Gulfstream G280 (HTF7250G)
- Embraer Legacy 450/500 & Praetor 600 (HTF7500E)
- Cessna Citation Longitude (HTF7700L)
The court ruling
According to CTV News, the Quebec Superior Court has ruled that Honeywell must negotiate with Bombardier on the cost of the jet engines it produces for the Canadian firm. The judge ruled that Honeywell is obligated to negotiate in good faith with Bombardier with a goal to reduce the price tag on engines installed on its Challenger business jets.
As a result of the latest ruling, Honeywell will also have to hand over customer information and sales records to an independent auditor. This third party will then assess whether Honeywell sold turbofan engines to rivals at lower rates, in defiance of its contract with Bombardier.
Honeywell’s defense
Honeywell has since filed a motion to appeal the decision, stating that the aim of boosting engine performance while slashing costs was “aspirational.” The American firm is also seeking to deny Bombardier’s right to an audit of sales records and customer information to determine pricing.
At the heart of Honeywell’s defense is that it has not sold the same engine to competing planemakers. Instead, it asserts that the HTF7000 engine models all have adaptations specific to each company.
The judge called this practice “a manifestly absurd result,” with evidence showing “considerable similarity” between engines sold to all four companies. In his ruling, the judge stated:
“Honeywell’s textual argument has the effect of guaranteeing that Bombardier will get the best price for the products sold to Bombardier — a manifestly absurd result.”
Bombardier Wins Court Case Against Engine Supplier Honeywell
By Chris Loh
A court sided with Bombardier and its assertion that Honeywell was in breach of contract to provide the lowest price for engines.
On January 19th, a Quebec Superior Court judge ruled that Honeywell was in breach of its contract with Bombardier. Honeywell, the supplier of engines that propel Bombardier’s business jets, was contractually obligated to offer the Canadian planemaker the best price.
A dispute over engine costs
The dispute between Bombardier and Honeywell has been ongoing for years. Since the 1990s, Honeywell had been exclusively designing and building engines for Bombardier, with the planemaker investing heavily in Honeywell for engine development.
However, the special relationship between the companies has shifted over the years, with Honeywell eventually going on to supply HTF7000 engines not only to Bombardier and its Challenger business jets, but to rival firms such as Gulfstream, Embraer, and Textron (maker of Cessna business jets.
Due to this increase in business, it was alleged by Bombardier that Honeywell raised the price of its engines for Bombardier. This was in defiance of a contractual obligation to reduce costs over time and offer the best price. Bombardier claimed that Honeywell was selling engines to rivals on more favorable terms.
“With the arrival of competitors Bombardier’s relationship with Honeywell became strained…Bombardier’s market share for super mid-size jets fell as competitors entered the market, while Honeywell became the sole engine manufacturer for all four competing OEMs (original equipment manufacturers).” – Justice David Collier via The Financial Post
Aircraft which utilize the HTF7000 Series
- Bombardier Challenger 300 (HTF7000)
- Bombardier Challenger 350 (HTF7350B)
- Gulfstream G280 (HTF7250G)
- Embraer Legacy 450/500 & Praetor 600 (HTF7500E)
- Cessna Citation Longitude (HTF7700L)
The court ruling
According to CTV News, the Quebec Superior Court has ruled that Honeywell must negotiate with Bombardier on the cost of the jet engines it produces for the Canadian firm. The judge ruled that Honeywell is obligated to negotiate in good faith with Bombardier with a goal to reduce the price tag on engines installed on its Challenger business jets.
As a result of the latest ruling, Honeywell will also have to hand over customer information and sales records to an independent auditor. This third party will then assess whether Honeywell sold turbofan engines to rivals at lower rates, in defiance of its contract with Bombardier.
Honeywell’s defense
Honeywell has since filed a motion to appeal the decision, stating that the aim of boosting engine performance while slashing costs was “aspirational.” The American firm is also seeking to deny Bombardier’s right to an audit of sales records and customer information to determine pricing.
At the heart of Honeywell’s defense is that it has not sold the same engine to competing planemakers. Instead, it asserts that the HTF7000 engine models all have adaptations specific to each company.
The judge called this practice “a manifestly absurd result,” with evidence showing “considerable similarity” between engines sold to all four companies. In his ruling, the judge stated:
“Honeywell’s textual argument has the effect of guaranteeing that Bombardier will get the best price for the products sold to Bombardier — a manifestly absurd result.”
