Boeing needs China to approve the 737 Maxim. But it won’t end its epic sales drought

11/20/2020 Business, World


The China Civil Aviation Administration (CAAC) has not yet said whether it will fly the 737 Max into the country after the US Federal Aviation Administration gave the go-ahead to carry the plane earlier this week. The U.S. government was a significant obstacle to clearing Boeing, while airlines would need the approval of other aviation regulators before the aircraft could fly between international destinations.

The European Union Aviation Safety Agency, which oversees flights in Europe, said it expects to take action in late December or early 2021.

But China’s sign-critical f is serious. Last year the 737 Max was the first country to land on the ground, with two planes crashing, claiming hundreds of lives. The CAAC said last month that it has its own criteria Boeing (B.A.) It needs to be met before China can be satisfied with the aircraft again, ensuring that the change in its design is “safe and reliable.”
“We are pleased to see them resume flights until they meet the requirements,” CAAC director Feng Zhenglin told a news conference in Beijing last month. “But if not, there will have to be a rigorous examination to ensure safety.”

CAAN did not respond to a request for comment from CNN Business.

An important market

China’s approval is not just about allowing the Chinese 737 Max to fly into Chinese airspace again. However, years of fighting over trade, technological and intellectual property rights between Washington and Beijing have severely damaged Boeing’s business in China, and getting back on track will be a major challenge.

Before the trade war, China was Boeing’s largest market. In 2015 and 2016, according to annual reports, China’s sales accounted for 13% and 11% of the company’s total revenue, respectively. In 2015, China was Boeing’s largest export market, and it was the third largest in 2016.
But the company has not sold any passenger planes to China in the last two years for the reason “everyone knows,” Boeing China president Sherry Carbury said late last year, according to the state’s Shanghai Observer. Two carriers were ordered by China Cargo in May.

Richard Abulafiya, vice president of analysis at aerospace consulting firm Teal Group Corporation, said the company’s China problems were “better than Boeing’s control.”

He added that, in China, Boeing is just a prisoner for forces beyond the dynamics of the aviation market. “It’s impossible for Boeing to wrap up in this huge mess, which includes trade barriers. [intellectual property] Disputes and tariffs. “

US-China tensions have manifested in other ways as well. Beijing said last month it would impose sanctions on American companies – including Lockheed Martin (LMT) And Boeing – which is involved in arms sales to Taiwan.
However, Boeing is excited about its prospects in China. Last week, the company released a surprisingly positive outlook on the country’s sales, saying it expects to sell 8,600 new aircraft to China over the next 20 years. This estimate of 4 1.4 trillion is even higher than where it was before the Kovid-19 epidemic – notably, China’s economic recovery this year has left the rest of the world behind.

Visiting research fellows from the Heinrich Foundation and senior fellows from National University of Singapore, Boeing alone is forcing its foothold in the Chinese civil aviation market for economic and strategic reasons. “Failure to do so will cost the company [research and development] Income and future opportunities for collaboration with strategic partners. “

Domestic competition

Boeing may face stronger competition as it seeks to get back on track in China.

Its feud with Airbus has intensified, especially after hitting Boeing with its 737 Crisis. Last year, just weeks after China landed the Boeing 737 Max, Airbus announced a deal to sell 300 passenger jets to Chinese Airlines.
Upstart Commercial Aircraft Corporation China is also developing its own aircraft.
China launches Airbus and Boeing

Abulafiya said Comac’s aircraft will be able to meet some of the demand in China over the next five to eight years, but analysts agree that the aircraft does not have a global competitor structure.

“For no [Boeing] There is no certainty as to when this will happen. Capri added that China has been trying unsuccessfully for decades to build cutting-edge engines and other tech.

Capri added that Boeing is also capable of building a solid strategy in China by isolating its businesses in the country and retaining some of its valuable intellectual property and other operations elsewhere. He pointed to the 737 plant in China’s Zhejiang province, where the company performs low-value tasks such as installing interiors.

“Competing in the Chinese market is always a festive deal,” Capri said. “But civil aircraft is no different from the situation for the automotive industry or semiconductors,” he said.

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