[Translation/Observer Network Horsepower] In the face of US-China trade frictions, Boeing may still find it difficult to stay out of it. Aircraft manufacturing giant Boeing is the only American company that can generate more than $5 billion in annual sales revenue in China without the product being directly targeted to ordinary consumers. Because of this, people initially believed that Boeing would be one of the most affected American companies by the U.S.-China trade friction. However, up to now, the impact of the measures to impose tariffs on Boeing by the United States and China is still quite limited.
Bloomberg Industry News Columnist Brooke Sutherland published an commentary on the Bloomberg website on March 20, 2019: "China's threat to Boeing is not a big thunder and little raindrops"
This phenomenon means that Chinese airlines still have demand for Boeing aircraft in the short term, and it also reflects China's intention to maintain a balance between Boeing and Airbus. In addition, Boeing is participating in the construction of a Boeing 737 completion and delivery center (co-owned by Boeing and COMAC) in Zhoushan, Zhejiang Province, not far from Shanghai. Boeing is playing an important role in China's strategy to develop its own aviation industry. China hopes that Boeing can continue to participate, and this factor should not be ignored.
However, facing Boeing, which has a passive position, China's attitude may be changing. Within five months, two crashes occurred in the Boeing 737MAX model, and China announced the first ban on flying the model around the world. It has been reported that China is considering removing the Boeing 737MAX model from the shopping list of "increasing imports of US products".
China was the first to announce a ban on the Boeing 737MAX model in the world, and countries around the world followed up and announced a ban on flights, which put the Federal Aviation Administration (FAA) in an embarrassing situation. The US aviation regulator, which has been defending the airworthiness of the 737MAX and has been in isolation, also banned the aircraft after persisting until the last moment. China may have seen the opportunity to build itself into a global aviation industry leader in this incident.
China should not refuse to accept the hat of "new global aviation security leader", especially at the moment when COMAC will deliver the C919 in 2021 and hopes to use this to tear a hole in the Boeing-Airbus duopoly monopoly pattern. China said that the C919 model (can accommodate 168 passengers and its market positioning is the same as that of the Boeing 737MAX model) has received more than 800 orders. However, compared with Western competing models such as the Boeing 737 series and Airbus A320 series, the performance of this aircraft in China has not yet been actually verified by the market, and its safety has not been proven, which is also the main weakness of the C919. Any positive moves made by China in the field of aviation safety will benefit the aircraft launched by COMAC and will also help enhance Chinese people's confidence in domestic aircraft.
The reason why China decided to include Boeing aircraft on the shopping list of "reducing trade surplus with the United States" may also be just to show a posture, which is a very common phenomenon in the game between Sino-US trade frictions. China puts Boeing aircraft in its shopping carts maybe just because Boeing aircraft is an expensive commodity, and it has no other meaning. The catalog price of the Boeing 737MAX model before the discount exceeded US$100 million, but China's trade surplus with the United States exceeded US$300 billion. China has reportedly promised to significantly narrow the surplus by 2024, but many economists do not believe that China can do this because the United States is already too dependent on imported goods from China. If China removes the Boeing 737MAX aircraft from the shopping list for "reducing trade surplus with the United States", the possibility of achieving this goal is even lower.
In my opinion, China's decision to purchase Boeing aircraft is more like a short-term strategy. China will indeed purchase Boeing aircraft at the moment, but once COMAC starts delivering C919s in large quantities, China will eventually reduce its dependence on Boeing and Airbus. The key to the problem is that China's willingness to expand its Boeing fleet is obviously not very strong.According to data released by Boeing, 4,636 of the orders placed by countries (or regions) around the world for the Boeing 737MAX models have not been delivered, of which 1,045 have not been delivered in the United States, 356 have in Ireland, 254 have in India, 236 have in Indonesia, 129 have in Brazil, 127 have in Hong Kong, 112 have in Singapore, and only 104 have in mainland China, which is not as large as one company in Southwest Airlines. Although China's share cannot be said to be insignificant, it is not as large as cancellation of orders will cause a huge blow to Boeing. As my colleague David Fickling pointed out in a commentary article by Bloomberg: "China's insignificant orders are inconsistent with people's predictions that China's middle class population will expand rapidly, which actually reflects that China's airlines have taken the C919 into consideration when expanding its fleet."
For Boeing, the risk that is currently facing is not that it may lose orders that have not been determined in trade negotiations, but that China may cancel orders that have been signed and not delivered. Although China's undelivered quantity accounts for a small proportion, once China does this, it is likely to trigger another wave of countries competing to imitate.
People generally believe that the order quantity of Airbus A320 series models is already very large, and it is difficult for Airbus to further expand its production capacity in order to seize the orders of Boeing 737MAX models. But if you can take a little away, Airbus may not refuse to make some efforts to do so. French President Macron has reportedly recently negotiated with the Ethiopian Prime Minister on more purchases of Airbus planes in the future. Macron is also preparing to discuss Airbus orders when meeting with Chinese President Xi Jinping at the end of this month. Don't forget that there have been reports that China's Xiamen Airlines is likely to give up allegiance to Boeing and turn to Airbus' arms, and China and Airbus have been talking intermittently for a US$18 billion order for a long time.
How much damage will the Boeing 737MAX model suffer from continuous air crashes in the short term? It is still unknown, but Boeing's opponents have not wasted their time.
Below is the reader's message after this article. The part selected by Observer.com is translated as follows, for reference only:
Alex Wijaya: It is a shame for the US media to link aviation security issues with the US-China trade war. There was no crash in China, but several Chinese passengers were killed in the Egyptian Airlines crash. Obviously, the Boeing 737MAX is no longer a safe aircraft model, and Boeing and the FAA (Federal Aviation Administration) have not fulfilled their responsibilities to ensure aviation safety. As an official from China's civil aviation regulatory authorities said, "China has been waiting for the FAA to take action first, but if the FAA cannot complete its work, we have to do it for them."
Henry: This is not a trade issue. The root of the problem is that FAA outsourced the safety certification work of Boeing aircraft to Boeing itself, which led to the flawed Boeing 737MAX model. After finding the solution, we need independent agencies in Europe and China to conduct independent safety certification for Boeing aircraft. In addition, pilots should also participate in comprehensive training in the flight simulator before flying a new model, rather than just looking at the information on the iPad.
richard may: China's C919 is just a "paper dragon".
Scubamonkey reply richard may: I'll make a prediction. In the next 10 years, the world aviation market will be dominated by Airbus and COMAC. The Boeing 737 model involved encountered more than just software upgrade problems. People may eventually find that this model needs to be completely redesigned, so Boeing will have a hard time. Airbus has a very solid position and is expected to spend $1.2 trillion on aircraft purchases in the next 20 years, and COMAC will benefit from this large order.
holycrapchris replied to Scubamonkey: COMAC cannot dominate the market with just one model. The C919 will not be delivered until 2021, while the C929 is still in the design stage, and it will be delivered after 2026.
Scubamonkey replied to holycrapchris: As long as there is nothing wrong with the C919, people will always remember how Boeing used sensor failures and software problems to cover up the design flaws of the Boeing 737MAX model. In addition to the body, many of the components of the C919 come from CFM, Honeywell, Rockwell, Cadde and Parker. They chose CFM's Leap-1C engine, which shows that they have considered the overall design of the C919. China will spend $1.2 trillion to purchase aircraft in the next 20 years, and most of the orders will fall into the hands of Airbus and COMAC. I don't think sensor and software issues are all the causes of the Boeing 737MAX crash. Don't be surprised if one day Boeing announces that it needs to redesign the Boeing 737MAX model. Everyone still remembers the toxic milk powder incident in China. The Boeing 737 is such an incident.
Lamont Cranston: The big trouble is that it is the inherent design defect of the Boeing 737MAX model that caused the air crash, which is difficult to solve. The engine installation position makes the aircraft fundamentally unstable. When designing fighter jets, software can be used to make up for design defects, because once problems occur, the pilot can still eject from the cabin to survive, and civil aviation aircraft are not designed in this way. Boeing has long been reluctant to perform a clean sheet design when it launched its derivative models, and that's the punishment.
(Translated by Observer.com Ma Li from the US Bloomberg website on March 20, 2019)
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