January 17, 2020

Boeing Is Way Behind Airbus in Race for China’s Next Big Order
(Bloomberg) -- The long-awaited trade agreement between the U.S. and China may pave the way for Boeing Co. to resume sales to the world’s second-largest aviation market, but the American giant has much catching up to do against European archrival Airbus SA.China Aviation Supplies Holding Co., which buys planes on behalf of the nation’s airlines, has been in talks with Airbus since 2019 about purchasing jets for the country’s next five-year economic plan that begins in 2021, people familiar with the matter said, asking not to be named discussing a private matter. Those talks began early last year, one of the people said. China’s top economic planner, which needs to clear negotiations of this magnitude, hasn’t even authorized the state procurement firm to begin talks with Boeing yet as trade tensions held back discussions, the person said.This means the Chicago-based aircraft maker is at least months behind Airbus in securing orders from China, which Boeing estimates will need more than 8,000 planes in the next two decades. Boeing is still reeling from the grounding of its best-selling 737 Max planes, which resulted in the company delivering fewer than half of the planes that Airbus did last year, the biggest defeat in the industry’s 45-year duopoly.Chief Executive Officer Dave Calhoun on Wednesday voiced optimism that Boeing will continue to have a valued relationship with China. A representative at the company declined to comment beyond what the new CEO said. The National Development and Reform Commission, which is China’s main economic planner, and China Aviation Supplies didn’t immediately respond to requests for comment. Airbus declined to comment.Things may be looking up for Boeing. Aircraft were among the $200 billion in American purchases that China pledged to make as part of a phase-one accord, though details weren’t disclosed. Also, it’s unlikely that China would shun Boeing entirely because the country has historically split its orders evenly between the two manufacturers, Airbus doesn’t have the capacity to meet all of China’s needs and such a drastic move would require thousands of pilots to be retrained.Trade tensions have hindered Boeing’s ability to capitalize on surging demand from a country that’s expected to become the world’s largest aviation market in the coming years. China will need to spend $2.9 trillion on new aircraft and ground services over the next two decades, Boeing predicted in September.The talks with Airbus are separate from an already-announced commitment from China to buy $35 billion worth of the Toulouse-based company’s jets, according to the people.In China, which led the grounding of the 737 Max, airplane purchases need to be cleared by regulators before they are handed off to China Aviation Supplies. Sales are then often recorded as coming from unidentified customers by Boeing and Airbus, and may be unveiled at various stages of the approvals process.\--With assistance from Siddharth Philip and Miao Han.To contact Bloomberg News staff for this story: Haze Fan in Beijing at hfan40@bloomberg.netTo contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Will DaviesFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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