Why China and Boeing still need each other

Boeing’s sales of commercial aircraft to China have slowed to a trickle as US-China relations have deteriorated. But there are new prospects for the company to regain traction.

A meeting this month between President Biden and President Xi Jinping of China failed to produce any public progress toward resuming aircraft sales, but it could ease tensions between the two countries, which bodes well for Boeing, a giant of the American production. Perhaps even more importantly, Boeing and China still need each other.

“There are a lot of incentives for everyone to do a deal here,” said Eddy Pieniazek, chief advisory officer at Ishka, an aviation consultancy. “A lot of that has to do with timing.”

Six years have passed since Boeing’s last order for large planes from China agreement to purchase 300 aircraft which was signed during a visit to Beijing by President Donald J. Trump. The company’s customers and government officials in China have also for years refused to allow delivery of previously ordered 737 Max jets, the company’s most popular commercial aircraft.

As a result, Boeing has redistributed dozens of planes destined for Chinese airlines to other customers. Boeing has 85 Max planes in storage awaiting delivery to Chinese airlines, for which the planes were even painted years ago. These are among 250 aircraft in Boeing’s inventory, most of which the company says it expects to deliver by the end of next year.

China is a crucial market for Boeing. Before the pandemic was about a third of Boeing’s 737s were delivered to the country. In the next two decades it will Boeing projectsChina will account for 20 percent of global aircraft demand. This means China will need an estimated 6,500 single-aisle planes, such as the 737 Max, and more than 1,500 larger twin-aisle planes, such as Boeing’s 787 Dreamliner, Boeing said.

The Max was banned worldwide 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 aboard 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 there in January and all 95 Max aircraft in China are now back in service.

Although Boeing’s sales and deliveries to China have fallen sharply, the company has not been left out. Boeing sold a handful in 2020 to a Chinese leasing company, ICBC Leasing, which also took delivery of a dozen Max jets in 2021 and 2022. Boeing has also sold and delivered dozens of 777 freighter planes 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 for the plane worldwide, not including cancellations. At an air show in Dubai this month, the company announced more than 200 additional orders, about a third of them for the Max. That sales momentum, confidence in the company’s ability to speed deliveries and other recent positive news have helped boost Boeing’s stock price more than 15 percent this month.

But Boeing still lags behind its European rival Airbus in terms of orders. Airbus has more aircraft in use and orders in China and has taken the opportunity to increase its lead: last year it announced an order for almost 300 additional aircraft in the country, and this year it said it would double production capacity at a factory there.

Still, it will be difficult for China to grow without Boeing, experts say. Even with existing orders from Boeing, Airbus and Comac, a domestic aircraft manufacturer, 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 in the coming year to fill these gaps,” said Dan Taylor, head of consultancy at IBA. “Comac will not be able to fulfill all that.”

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

China will need new aircraft to meet that growing demand. According to Cirium, an aviation data provider, more than 95 percent of all passenger aircraft are in use in China.

To meet its needs, the country has moved forward with production of its own narrow-body jet, the Comac C919, which is comparable in size and range to the Max and its main rival, the Airbus A320. The Chinese government has 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 even that plane’s future is tied to Western countries. The aircraft made its first published test flight in 2017 and entered limited commercial service between Shanghai and Chengdu over the past year.

Most orders for the C919 have been placed by Chinese airlines, although some 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 said it would be years before Comac could make such planes in large numbers.

The C919’s price is widely believed to be lower than competitors from Boeing and Airbus, but foreign airlines are concerned about fuel efficiency. Improved efficiency can deliver big savings on operating costs and has become increasingly important as airlines feel pressure to reduce their large environmental footprint.

Comac is also working on a long-range, wide-body aircraft that could one day compete with planes like the Airbus A340 and the Boeing 787 Dreamliner, but it has not said when that plane might be ready.

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

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