New China Airliner Major Threat to Boeing

China really is Boeing’s biggest market — but Thursday’s order news is fake

China’s President Xi Jinping and U.S. President Donald Trump announced an order for 300 Boeing jets, but most are not newly ordered.

The announcement by President Donald Trump and President Xi Jinping in China on Thursday of an order for 300 Boeing jets with a whopping list price of $37 billion is the usual fake news out of state visits to China. According to a person familiar with Boeing’s orders, who asked not to be identified because of the political sensitivities, most of the jets included in the announcement — 40 larger twin-aisle aircraft and 260 single-aisle airplanes — are not newly ordered. As is typical with state visits of foreign leaders to China, the announcement includes jet deals that were either ordered long ago or are not yet firm orders. Boeing declined to comment, but the absence of any details in its news release suggests it’s more spin than actual news. In this case, the puffery is not so much from Trump. It’s just the usual way of doing business in China — the same game whether it’s Trump or former president Barack Obama or the president of France visiting and whether the jet maker is Boeing or Airbus. Underlying the stage-managed news is the reality for Boeing that China, the world’s largest commercial aircraft market, will indeed take hundreds of its jets in the years ahead. But the order details emerge from China’s closed business system only slowly.

A similarly fake announcement, for 200 Boeing airplanes, was trumpeted in 2011 when Xi’s predecessor, President Hu Jintao, came to the U.S. It turned out that none of those 200 were new orders ; it was just a repackaging of orders placed over the previous four years. In 2015, on Xi’s first state visit to the U.S., when he visited Seattle en route to the White House , the order announcement was for 300 jets. Again, many of those 300 were orders Boeing had booked previously. During a visit by Xi to Berlin in July, Airbus touted a $22 billion order for 140 planes from China, including 40 twin-aisle A350s and 100 single-aisle A320 jets. Yet the Airbus order book for the year to date includes only 20 firm orders for the A350 from China, and those were ordered by China Southern last April. The A320 order book contains just one significant Chinese firm order for the year, an order for 32 from Cathay Pacific. Chinese jet-buying process Behind the staged puffery, is this reality: China has been steadily buying Boeing jets and will continue to do so. Already, one third of the all the 737s built in Renton go to airlines in China. But China, as a centrally controlled economy, buys jets in a different way than other nations. First, the Chinese government approves a large purchase from either Airbus or Boeing — it has a long-standing policy of buying roughly […]

Leave a Comment