By Scott Hamilton
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 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.
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.
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.”