Canadian Aircraft Manufacturer May Fly South for Subsidies and Cheap Money

April 3, 2008

Missouri lawmakers have fast tracked


that creates a new state income tax credit program to lure Ottawa-based aircraft manufacturer

Bombardier Aerospace

to Kansas City.

If Missouri’s package passes, the $375 million aircraft assembly plant will receive an estimated $300 to $400 million in

“Enhanced Enterprise Zone”

credits over 22 years. However, it was the weak American dollar (which

has lost about a third of its value versus the Canadian dollar over the past five years

) rather than the subsidy that prompted Bombardier executives to consider relocating to the U.S.

Both Kansas City Mayor

Mark Funkhouser


Kansas City Star


Chris Lester

, frequent critics of subsidy giveaways, are in favor of the deal. That’s because this is not a typical subsidy deal. World Trade Organization regulations forbid aerospace companies from receiving subsidies, so Bombardier would have to pay back the tax credits through fees charged to buyers of jets assembled at the plant.

Meanwhile, Canadian officials are teaming up to offer a $488 million incentive package to keep the expansion site at home. While it’s unclear if the bigger subsidy will be enough to overcome the weak American dollar, one industry analyst


whether Bombardier is using the Missouri offer as leverage in its talks with Canadian officials.

In other jet-set subsidy news…

Michael Scheeringa, CEO of Cuyahoga County, Ohio-based

FlightOptions LLC

wants a big tax break. After all, it would only be fair.

That’s after it was announced in March that

NetJets Inc.

would receive about $68 million in state and local subsidies to assist in the $200 million expansion of its Port Columbus Airport aviation campus. FlightOptions and NetJets are direct competitors in providing private flights to corporate executives and,

Scheeringa points out

, the subsidies give NetJets an unfair competitive advantage.