Boeing being edged out by Airbus in China’s aviation market, but is there a way back amid US tensions?
- China’s narrowbody and widebody passenger jet fleet size rose by 18 per cent and 26 per cent, respectively, as of July compared to July 2018
- But the increase mainly came from Airbus’ A320neo, A321neo and A350-900, with US-China tensions limiting Boeing’s access to the critical aviation market
Chinese airlines’ need to renew their fleets of aircraft could offer an opportunity for Boeing, but ongoing US tensions and the launch of China’s first domestically built narrowbody passenger jet may undermine its efforts to compete with European rival Airbus and pick up new orders in the critical aviation market.
Although domestic travel in China declined and its borders were largely closed for international flights during the coronavirus pandemic, Chinese airlines expanded their fleets, mainly by purchasing from Airbus, according to Cirium Ascend fleet data.
The narrowbody passenger jet fleet size in China grew by 18 per cent as of July compared to July 2018, while the number of widebody passenger jets rose by 26 per cent, the data showed.
The increase mainly came from Airbus’ A320neo, A321neo and A350-900, while the contribution to China’s fleet from Boeing’s 737 MAX 8 and 787-9 were relatively marginal over the same period.
Despite the lack of Boeing orders from China’s airlines, growth has still been possible
“Hence, despite the lack of Boeing orders from China’s airlines, growth has still been possible albeit clearly not at the same trajectory as seen in the mid-part of the last decade,” said Rob Morris, head of consultancy at Ascend by Cirium.
Last year, Boeing said it was disappointed that “geopolitical differences continued to constrain US aircraft exports” in response to China’s three biggest state-owned airlines buying 300 jets from Airbus.
But the Chicago-based aerospace company may be able to stage a comeback as the average age of Chinese airlines’ fleet has risen significantly over the past five years.
China’s fleet will require more new planes to facilitate growth and replacements following disruptions caused by the coronavirus pandemic and the suspension of the production of the 737 MAX, according to Morris.
Cirium’s most recent fleet forecast in November projected that airlines in China will need some 2,800 new narrowbody jets and 600 new widebody jets over the next 10 years. The average age of a narrowbody passenger jet in China is 8.7 years and 7.6 years for a widebody aircraft, the Cirium fleet data showed.
Given both Boeing and Airbus currently hold a large order backlog, Chinese airlines may increasingly find it difficult to secure delivery slots before 2030, Morris added.
“Hence, if Boeing are permitted to recommence deliveries into China once again, then there may be an opportunity for the company to sell more units if there are slots available,” Morris said.
We are not dependent on it. We want to do it, and we certainly want to support our customers in China
In July, Boeing executive vice-president Stan Deal met the head of the Civil Aviation Administration of China, Song Zhiyong, in Beijing, according to a statement from the regulator. The two exchanged views on Boeing’s business development in China and the strengthening of US-China civil aviation cooperation, the statement added.
Boeing CEO Dave Calhoun said in an earnings call with analysts at the end of July that more than 90 per cent of its 737 MAX were now back in service in China, and that the company is receiving “a lot of good signs” when it comes to resuming deliveries.
“We are not dependent on it. We want to do it, and we certainly want to support our customers in China. And we will be the free-trade beacon with respect to our administration and – and all the political influences,” said Calhoun.
“But I’m just going to leave it postured just the way it has been. Know that we have 85 airplanes that we would like to begin delivery on.”
Why did it take 15 years for China’s C919 to make its first commercial flight?
Stephen Olson, a senior research fellow at the Hinrich Foundation, believes that Airbus remains “geopolitically better positioned than Boeing” to meet the demand from China’s state-owned airlines.
“As the US-China geostrategic rivalry continues to play out, China needs to curry favour with the European Union (EU) in order to prevent the EU from aligning too closely with the more confrontational policies being pursued by the US,” said Olson, a former trade negotiator with the Office of the US Trade Representative.
“A fully united US-EU common front on China policy would be highly problematic for Beijing.”
And ordering from Airbus, rather than Boeing, could also be an effective way to remind the EU of the economic benefits of maintaining positive and constructive relations with China, Olson added.
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Why it took China’s home-grown C919 plane 15 years to start flying passengers
China’s heavy investment in grooming a domestic champion in the civil aviation industry also means that the need to order from foreign competitors is diminishing, Olson said.
A second C919, the narrowbody passenger jet built by the Commercial Aircraft Corporation of China (Comac), to enter service made its first commercial flight with China Eastern Airlines this week.
Comac has said its annual production capacity is expected to reach over 150 in the next five years.
Whether or not Boeing will specifically be on the agenda for her upcoming meetings in Beijing is hard to know at this point
Olson said that the US would continue to seek to expand trade with China away from sensitive sectors, despite rising tensions and the various bilateral restrictions.
Raimondo has previously criticised Beijing for preventing its domestic airlines from buying Boeing planes.
“As secretary of commerce, Gina Raimondo is America’s business ambassador, and I would expect that expanding US exports would be on the agenda of almost any meeting she has with foreign officials,” Olson added.
“Whether or not Boeing will specifically be on the agenda for her upcoming meetings in Beijing is hard to know at this point, but pushing for greater market access is a foundational cornerstone of any commerce secretary’s portfolio.”
