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Why China and Boeing still need each other

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Boeing’s commercial aircraft sales to China have slowed as U.S.-China relations have deteriorated. But there are new prospects for the company to regain ground.

A meeting this month between President Biden and Chinese President Xi Jinping did not result in public progress toward resuming aircraft sales, but it could ease tensions between the two countries, boding well for Boeing, a giant of the American manufacturing industry. Perhaps more importantly, Boeing and China still need each other.

“There’s a lot of incentive for everyone to make a deal here,” said Eddy Pieniazek, head of consulting at Ishka, an aviation consulting firm. “A lot of it depends on timing.”

Six years have passed since Boeing’s last major plane order from China, a deal to buy 300 planes signed during a visit to Beijing by President Donald J. Trump. For several years, the company’s customers and government officials in China have also refused to allow delivery of previously ordered 737 Max planes, the company’s most popular commercial jet.

As a result, Boeing redistributed dozens of planes intended for Chinese airlines to other customers. Boeing holds 85 Max planes awaiting delivery to Chinese carriers, for which the planes were even painted years ago. These are Boeing’s 250 aircraft in stock, most of which are expected to be delivered by the end of next year.

China is a crucial market for Boeing. Before the pandemic, about a third of Boeing’s 737s were delivered domestically. According to Boeing, over the next two decades, China will account for 20% of global aircraft demand. That means China will need about 6,500 single-aisle planes like the 737 Max and more than 1,500 larger twin-aisle planes like Boeing’s 787 Dreamliner, Boeing said.

The Max was banned globally for 20 months after it was involved in two fatal crashes in late 2018 and early 2019, killing 346 people in Indonesia and Ethiopia. Passenger flights on the Max resumed in much of the world in early 2021, but China was the last major country to allow the plane to fly again. The first Max passenger flight took place in January, and all 95 Max aircraft in China are now back in service.

Even though Boeing’s sales and deliveries in China have declined significantly, the company has not been excluded. Boeing sold a handful in 2020 to a Chinese leasing company, ICBC Leasing, which also took delivery of a dozen Max planes in 2021 and 2022. Boeing has also sold and delivered dozens of 777 freighters to customers in China in recent years.

In the three years since the Max began flying again, Boeing has received more than 2,100 new orders worldwide for the jet, not including cancellations. At an air show in Dubai this month, the company announced more than 200 additional orders, about a third of those for the Max. That sales momentum, confidence in the company’s ability to ramp up deliveries and other recent positive news have helped push Boeing’s stock price up more than 15% this month.

But Boeing still lags behind its European rival Airbus in terms of orders. Airbus has more planes in service and on order in China and has seized the opportunity to try to expand its lead: last year it announced an order for almost 300 more planes in the country, and this year , it announced it would double its production capacity at a factory there.

However, China will struggle to develop without Boeing, experts say. Even with existing orders from Boeing, Airbus and Comac, a local aircraft maker, China is expected to need nearly 1,100 additional planes by the end of 2030 to replace aging planes and meet growing demand for domestic travel, according to IBA, an aviation consultancy. .

“We will need some announcements over the next year to fill these gaps,” said Dan Taylor, head of consulting at IBA. “Comac won’t be able to fill all that.”

In the two decades before the pandemic, air traffic in China increased tenfold, from just over 60 million passengers a year in 2000 to nearly 660 million in 2019, according to the World Bank. This growth rate is expected to slow in the coming years, especially now that China has built more miles of high-speed rail lines than the rest of the world combined. But the country’s appetite for air travel is expected to increase further.

China will need new planes to meet this growing demand. Of all passenger planes in China, more than 95% are in service, according to Cirium, an aviation data provider.

To meet its needs, the country began production of its own narrow-body aircraft, the Comac C919, which is similar in size and range to the Max and its main rival, the Airbus A320. The Chinese government generously funded Comac, a state-owned company with more than 110 buildings in Shanghai, for the design, testing and assembly of the C919.

But the C919 uses equipment, including engines, from General Electric and other American and European suppliers, meaning that even the future of this plane is tied to Western countries. The plane made its first publicized test flight in 2017, and last year it entered limited commercial service between Shanghai and Chengdu.

Most C919 orders have been placed by Chinese airlines, although a few have come from developing countries that are part of China’s Belt and Road Initiative. The arrival of the C919 means Chinese airlines will have a locally produced alternative to Airbus or Boeing, which entered the Chinese market 50 years ago, although experts estimate it will be years before Comac can manufacture such aircraft in large quantities.

It is widely believed that the C919 is priced lower than competitors Boeing and Airbus, but foreign airlines are concerned about its fuel efficiency. Improved efficiency can generate significant operational cost savings and is becoming increasingly important as airlines feel pressured to reduce their significant carbon footprint.

Comac is also working on a long-haul widebody plane that could one day compete with planes like the Airbus A350 and Boeing 787 Dreamliner, but it has not said when that plane might be ready.

Building a commercial plane maker is no easy task, and experts say it will likely be many years before Comac can produce planes on the same scale as Airbus and Boeing, which have decades of experience. experience and established global supply chains.

“For the next decade, China needs Boeing and Airbus,” said Michel Merluzeau, director of Aerospace Intelligence & Research, a defense and aerospace consultancy.

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nytimes

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