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Boeing, GE optimistic for return to normalcy with China

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By Scott Hamilton

Larry Culp, CEO of GE Aerospace. Credit: GE.

June 20, 2023, © Leeham News: Relations between the US and China remained strained, beginning with the Trump Administration’s trade war initiated in 2017—which continues under the Biden Administration.

The strain has been exacerbated by China’s tilt toward Russia during the Russian-Ukraine war. Except for a brief meeting at this year’s G7 meeting between President Xi and President Biden, there has been little in the way of top-level diplomatic contact until this week. Secretary of State Antony Blinken met with Xi this week, leading to optimism by Boeing and GE Aerospace that relations between the US and China may be thawing.

During executive media briefings surrounding this week’s Paris Air Show, Boeing Commercial Airplanes CEO Stan Deal and GE Aerospace CEO Larry Culp gave their outlooks about the near-term future.

Boeing’s status with China

Boeing’s status with China has been on hold since the trade war began in 2017. Only a few orders, for 777 freighters, were placed since then. Deliveries were also limited to a handful of 777Fs. Historically, China accounted for between 25% and 33% of Boeing’s annual deliveries.

China was the first regulator to ground the 737 MAX following the two fatal crashes in 2018 and 2019 involving Lion Air and Ethiopian Airlines. Boeing built 140 737s and a handful of 787s for Chinese airlines and lessors before suspending production of the 737 during the grounding. Only a few of these were delivered to lessors for operation by airlines outside China.

There were 95 MAXes operating insider China when the grounding occurred. China was the last regulator than Russia) to recertify the MAX. About two-thirds of these have returned to service. Deal said progress is being made to complete the paperwork demanded by China to resume deliveries of the MAX. He expects this to happen within months.

Competition from China

China is developing a commercial aviation sector and its first significant challenge to Boeing (and
Airbus), the COMAC C919, finally entered service in May after a seven-year delay. The C919 competes with the 737 MAX and the Airbus A320neo. LNA’s analysis concludes the C919 is a respectable competitor.

“I do see China as the third competitor evolving, but I think there are still decades of work to go,” Deal said during the media briefing. “It’s greater competition with the 919 is going to create. It will keep Airbus and us as sharp as it can as we move forward. I think our formula is to continue to innovate and around the future. You’ll continue to position your products ahead and you won’t perish. That’s why we’re focused on some of those future capabilities.

GE provides an engine for the C919

The CFM LEAP-1C engine (GE is a 50% partner in CFM) is on the C919. As with Boeing, GE’s progress in China has been hindered by trade and geopolitical issues. He lengthy COMAC delay essentially froze GE’s growth for the LEAP within China.

“We’re optimistic despite the geopolitical conversations,” Culp said. “We know, having been there for 40 years serving 60 airlines currently, the growth[rate] is expected to drop. The government really is going to tightly tie growth to capacity. Both Airbus and Boeing are going to help to fulfill that capacity.

“I think having Secretary Blinken in Beijing this weekend is an encouraging sign that we’re probably getting closer to the point where we’re perhaps going back to normal course of business. I don’t expect that will be announced this week. But step by step. We’re optimistic we’ll make progress.”

China wants to develop a domestic engine the C919 as a choice from the LEAP. Development of that and the airplane has been slow. The production ramp up is to be slow. Nevertheless, Culp and GE are optimistic.

“I think that we’re encouraged that plane is in the air, with passenger service. We’re proud to be underway. But over time, Dave Calhoun [the Boeing CEO] has indicated there’s going to be a place in the China market and perhaps satellite markets for the COMAC plane. But if you think about the next 20 years, it’s not outside logic to expect the C919 to have a reasonable share of its market sector.”

 

 

 Category: Airbus, Boeing, China, Comac, GE Aerospace

 Tags: , , ,

40 Comments on “Boeing, GE optimistic for return to normalcy with China”

  1. Boeing should be optimistic in counting China in their Sales projection, and not ignore the fact, that China has black-listed Boeing, Raytheon and Lockheed for agreeing to sell their Warmongering gadgets to Taiwan. Boeing short memory span, or they are trying to shove this issue under the rug?

    Reply

    • The execs appear to be expressing a PR-oriented fantasy rather than a prognosis born out of any form of actual analysis…

      Reply

      • I did not see a real basis for optimism in the execs’ actual quotes. More like hopes..

        Reply

        • Have to stay tuned and see won’t we?

          It can go either way depending on factors none of us control or influence.

          Good article in the NYT on various current aspects of China economy.

          Reply

          • The coming “collapse” since …. 2001! Hey, even a broken clock is right twice a day! There’s no way China is able to take any delivery from BA since the big three plan to have a few dozen from AB this year (while retiring BA NB aircraft). 😁

            Cope.

            The Inconvenient Truth About U.S. Growth
            -> “For anyone who’s serious about their claims that the U.S. is leaving its peers in the dust or are convinced that China is peaking, I suggest they find a colleague and make a bet like the one I’ve proposed to my colleagues at Harvard. Specifically, I’ve offered bets up to $1,000 on the proposition that in 2023 U.S. GDP will not grow faster than China’s. Indeed, I even offered to bet that the U.S. will not grow half as fast as China this year.”

            – Graham Allison is the Douglas Dillon professor of government at Harvard University.

            https://www.barrons.com/articles/us-growth-gdp-china-economy-519a9c5

            -> Tip Of The Iceberg? Big Real Estate Firm Walks Away From Two Hotels In San Francisco |
            -> San Francisco hit again as large mall owner walks away

          • The opinion piece in Barrons- not written by the journalists or editors- is Graham Allison a Harvard professor of Government who specialised in national security & nuclear weapons policy.

            Not a shred of actual economic credibility from an professional academic so we can see it just fluff in a minor business magazine. Will go down well, as intended, in the forbidden city

          • Oh you can’t debate what are raised by G. Allison I guess? Hehe. BTW are you going to label him a commie like in the fifties simply because you don’t like to hear what he said?? 😂

          • What debate . Offers no facts apart from a bet with colleagues.
            Any way who would even bother with a non economic expert whos way outside his professional area.
            Its a no brainer to just ignore him , like the rest of the media have done
            Cant be fine in China if the they are cutting interest rates to boost the economy- thats an actual fact you might like to debate
            https://www.nytimes.com/2023/06/19/business/china-loan-prime-rates.htm
            ‘The latest cuts send the message that Beijing wants to stabilize output while exports are falling, construction has stagnated and consumer confidence is weak. ‘ … any comment on this as wewll ?

          • Lol. Don’t you read the article before you post any comment?? So typical.

            What’s the inflation rate in China? Why the central bank has to maintain high interest rate?? Oh BTW are you an economic “expert”? What’s your qualifications and work experience? 🤔

          • Allison’s article has sources from many economic “experts” including IMF, academic economists, investment banks and CBO. But you won’t know, because you never read it! Poor duke. However you’re eager to discredit the writer. So both @TW/duke, are you willing to bet U.S. has faster GDP growth in 2023 than China or not?

          • FT: Moody’s warns of ‘serious challenge’ to $1.4tn private credit market

    • Politics does get in the way of economics despite what some might think. It is what it is.

      Reply

    • Norm:

      That statement is a hoot, thank you for my morning laugh.

      Reply

  2. “I do see China as the third competitor evolving, but I think there are still decades of work to go,…”

    Stan should take a look at how quickly things evolved after China had gotten its first HST up and running.
    He might want to take a look at China’s nuclear power program, too.
    And its space program.
    And its navy shipbuilding program.
    And its hypersonic missile program.
    …

    Reply

    • If China keeps investing they will eventually catch up on aircraft design. If the top Chinese administration analysts do a comparison of the two Chinese systems Taiwan and Mainland China they might come to the conclusion that the Taiwanese democratic system is better for its population and choose it for China, then it will be similar and joining the 2 makes no difference. Mainland China already has 2 systems where smaller businesses work like Taiwan with free competition but as you move up in size and power Beijing starts to control things.

      Reply

  3. Looks like COMAC intends to develop a widebody, with Russia as a supplier:

    ““The pandemic has changed the air transportation market, changed the requirements for range, passenger capacity, performance, fuel cost. Accordingly, the sanctions pressure that we experienced has changed the composition of cooperation,” Slyusar explained at the time. According to the chief executive, lockdowns and sanctions imposed upon Russia following its invasion of Ukraine left an impact on the project, which is why UAC has to “update the format of participation”.

    “Later in 2022, Denis Manturov, the Minister of Industry and Trade of Russia, said that Russia might become “a supplier of units and components” rather than a full partner, according to another Interfax report from March 2023. ”

    https://www.aerotime.aero/articles/did-china-kick-russia-off-the-craic-cr929-program

    Reply

  5. What is missing..is good old aerospace investigative journalism Today, journalists are too dependent on pre show briefings and press releases

    I have my doubts are part of supply chain, there are US sanctions on UAC/Aerocomposite Probably a good move to drop them as “suppliers” of the wing But Comac probably could work around the US sanctions with technology licensing to Comac and from Aerocomposite
    The MC 21 wing tool and automation is from France if I recall right (MTorres)
    “The MC-21 is set to become the first commercial aircraft in the world to use a composite wing, manufactured in a process known as ‘out of autoclave’ (OOA)”
    https://www.compositesworld.com/articles/infused-wing-sheds-light-on-aerocomposites-future

    Reply

    • When doing research on MC 21 program years ago, never got the answer of logistics of the CR929 widebody wing from Aerocomposite in Ulyanovsk Russia to Xian and/or Shanghai without oversize aircraft. My guess today, produce the composite wing in Xian (China center of excellence model for wings) and transport maybe on Chinese Y-20? to Shanghai for FAL
      Comac could just contract western companies for design and build of tooling and MTorres composite laying machines after buying the wing design from Russia (probably already designed)

      Reply

  6. More developments in the drive to create “normalcy” in US relations with China (NOT):

    “House Republicans Propose The Study Of An Oil Naval Blockade Of China”

    “The House of Representatives is discussing a move that would effectively amount to an act of war if carried out: a naval blockade on China.

    “The proposal for an amendment to the next defense budget of the United States came from Republican Rep. Ronny Jackson from Texas, the Epoch Times reports, and was among another 800 amendments approved by the House Armed Services Committee.”

    “Not all in Congress agree with Jackson, however.

    ““I can guarantee you if China issues a plan tomorrow about how it would blockade the United States, we’d consider that very provocative,” Democrat Adam Smith from Washington said, as quoted by the Epoch Times.

    “There are plenty of hawks in the House, though, it seems, and they have no issue whatsoever in discussing war with China.”

    https://oilprice.com/Latest-Energy-News/World-News/House-Republicans-Propose-The-Study-Of-An-Oil-Naval-Blockade-Of-China.html

    ***

    In Europe, we’ve seen this type of posturing before. When the ICC was set up in The Hague, the US passed legislation covering a potential invasion of The Netherlands (a NATO ally) in the event that US citizens would be brought before the court.

    Reply

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