Canada makes clear Boeing must back down if it wants jet order

FILE PHOTO: Boeing's logo is seen during Japan Aerospace 2016 air show in Tokyo, Japan, October 12, 2016. REUTERS/Kim Kyung-Hoon

Canada on Tuesday scrapped plans to buy 18 Boeing Co BA.N jets and made clear the company had little chance of winning a larger contract for 88 fighters unless it dropped a challenge against planemaker Bombardier Inc.

The announcement marks a new low in relations between the Liberal government and Boeing and casts into doubt the future of defense cooperation with the U.S. aerospace giant.

Canada announced last year it wanted to buy the Boeing jets as a stopgap measure to allow Ottawa to run a competition for 88 jets to replace its aging 77 CF-18s fighters.

Instead Ottawa will now buy a second-hand fleet of 18 Australian F-18s, the same planes the Canadian air force already operates. The value of the deal is set to be around C$500 million ($388 million).

In a clear reference to Boeing, Carla Qualtrough, public works and procurement minister, told a news conference on Tuesday that “bidders responsible for harming Canada’s economic interests will be at a distinct disadvantage” compared to other companies taking part in the competition for the 88 jets.

Innovation Minister Navdeep Bain did not respond directly when asked at the news conference whether Boeing could improve its chances of winning the order for 88 jets by bowing to a Canadian government demand to drop the trade challenge.

The cost of the 88 jets is estimated at C$15 billion to C$19 billion, according to Canadian officials.