Executives of Bombardier Aerospace seemed a bit defensive when they traveled from their Montreal headquarters to a recent aviation fair in São Paulo. Just east of Brazil's business capital are the headquarters of Embraer, Bombardier's smaller but aggressive rival. The two companies have fought for a decade over the market for regional jets — the ones with 20 to 100 seats that fly routes like Frankfurt to Munich. And the fight is becoming more intense: just last week U.S. Airways, which recently emerged from bankruptcy, struck a $4.3 billion deal to buy 170 regional jets, splitting the order evenly between...

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