By Tim Hepher and Alwyn Scott
PARIS/SEATTLE (Reuters) - Two words underpin Boeing's (N:BA) decision to launch a U.S. trade complaint against Bombardier (TO:BBDb), which plunged it into a row with Canada last week: "Never again".
Allegations that the Canadian firm dumped newly designed CSeries passenger jets in the United States at a steep loss have threatened a sale of F/A-18 warplanes to Ottawa, sending Boeing scrambling to save the deal.
Some analysts say Boeing carelessly put at risk billions of dollars of defense work or pandered to growing protectionism.
But decades after Boeing failed to prevent European upstart Airbus gaining momentum with early victories in the United States, people familiar with the company say the strategic importance of defending its core passenger jet business outweighs the diplomatic storm.
U.S. industry experts say Boeing and other jetmakers at the time did not take the European consortium seriously enough and allowed their future nemesis to poach U.S. airlines from 1978.
Again after the September 2001 attacks in the United States, when Boeing slashed production, Airbus (PA:AIR) filled the vacuum, building up market share and never looking back.
For years Boeing insiders have rued that decision, even while battling Airbus at the World Trade Organization (WTO) over mutual accusations of unfair subsidies.
While leading in widebody jets, it has seen the narrowbody market – where the industry makes most cash - slip away as Airbus grabbed some 60 percent of new-generation sales.
Such a significant imbalance in market share poses serious long-term risk to the loser in the Airbus-Boeing duopoly, because it creates a gap in costs that can't easily be bridged.
Now, Boeing sees a second rival entering its domestic market with what it sees as low prices and is determined not to underestimate the threat again, people close to the company say.
"It's a crucial entry market," said a person familiar with Boeing's strategy in taking on Bombardier. "This is the case Boeing might have brought against Airbus 40 years ago. Not taking action at the start led to consequences."
On the surface, Boeing's case is about the sale of jets to Delta Air Lines (NYSE:DAL) at what Boeing claims were unfairly low prices.
Bombardier denies Boeing's estimates of both the price and the cost at which it is able to make its new jet, while critics say Boeing accounting rules allow it to disguise weak pricing.
While the high-profile deal ignited Boeing's complaint, executives say Boeing's stance reflects a longer-term concern.
Although Bombardier's small narrowbody jet has so far barely scratched Boeing's larger 737 and has suffered a spate of financial problems, the all-new design disturbs a landscape made up mainly by makeovers of existing Airbus and Boeing models.
With Airbus still well ahead on narrowbody orders even after a recent lull, Boeing can ill afford to be squeezed on two fronts. Even less so with new players like China arriving.
A Boeing spokesman declined to comment.
PRECISION TRADE WEAPON
Boeing's response marries strategic worries about its narrowbody position with a legal tactic designed to exploit a vulnerability the CSeries has, but global rival Airbus did not.
The 110-130 seat CSeries relies mainly for now on the regional jet market, where North America is by far the largest single component and whose airlines therefore decide its future.
That hands Boeing the opportunity to make use of a domestic lawsuit ill-suited to its global confrontation with Airbus, but which if successful could deliver a hammer blow to the CSeries.
Trade sources see a second tactical motive for spurning the WTO and filing the industry's first such domestic U.S. case.
U.S. anti-dumping cases typically take a year - versus 13 years and counting in its trench warfare against Airbus.
That coincides with first delivery of a CSeries to Delta in April 2018. If Boeing succeeds, the jets could be hit from day one with extra duties, blunting Bombardier's competitiveness more quickly and more directly than normal trade sanctions.
Still, Boeing faces a headache over what to do about lost fighter sales if Canada makes good on a threat to drop a deal for F/A-18 warplanes in retaliation for Boeing's trade claim.
With Boeing's future fighter production in jeopardy as sales run dry, Boeing is anxious to keep its presence in that business long enough to compete for tomorrow's military programs.
But without stability in its narrowbody jetliner business, Boeing faces an even deeper concern, since this is the cash cow for many of the company's other activities.
Sources says Boeing's defense bosses signed off on bringing the trade case, highlighting the importance attached to the 737.
The broader stakes raised by Bombardier's foray into the U.S. market were underscored when China was reported to revive on-off talks to invest in Bombardier. Airbus itself weighed buying the CSeries before talks collapsed in 2015.
Whoever wins the trade spat between Bombardier and Boeing, one thing is clear: the small jet from Montreal has made its mark on the strategic calculations of all industry rivals, and now faces a battle for new sales.