In recent years, China has steadily edged closer to unseating the US as the world’s biggest commercial aviation market, making the country a must-win for Boeing Co. By 2019, with carriers such as China Eastern, China Southern and Air China carrying ever more passengers across the country and around the globe, China accounted for almost a third of purchases of Boeing 737 jets. Even after Airbus SE opened an assembly line in Tianjin in 2008, its American rival ruled Chinese skies. If China wanted to keep its citizens airborne, it appeared, the country needed aircraft from Boeing.
Then two fatal crashes involving the 737 Max—the most advanced version of the plane—spurred regulators around the world to ground the model. Growing trade tensions with the US further dampened China’s interest in buying from the biggest US exporter. And China’s harsh coronavirus lockdowns killed off whatever demand remained. As orders from the company’s biggest overseas market virtually evaporated, it suddenly began to look as if Boeing needed China more than China needed Boeing.
Since 2020, Airbus has delivered 384 jets to the country, versus just four for Boeing, according to researcher Cirium. After Airbus last July signed a deal to sell 292 planes to China, Boeing bemoaned the “geopolitical differences” blocking exports of its jets, noting that $10 billion in aircraft—mostly 737s—earmarked for China were stuck in limbo. By September, Boeing was offering those airliners to other buyers, and Chief Executive Officer Dave Calhoun was running out of patience. “You’ve got to move them,” he told reporters in Washington at the time. “You can’t wait forever.”
But in the past few months, Boeing’s fortunes in China have turned. In January the government ended its pandemic restrictions, unleashing a rebound in travel that has traffic approaching pre-Covid levels, and a few weeks later China allowed the 737 Max to fly again. Even as the US and China spar over trade, tariffs and Taiwan, Boeing executives are increasingly confident that within weeks its jets could again be winging their way to Chinese buyers. “It feels like there is some momentum toward more commerce,” Calhoun says.
With aviation roaring back, new jetliners are increasingly hard to come by. The Max is sold out until 2027, and Airbus’s waitlist stretches almost until the start of the next decade. After three years of lockdowns, China’s citizens are eager to travel again, but the country’s airlines are grappling with a shortage of aircraft to carry them, shifting the balance of power again in Boeing’s favor. “When you have a surplus of jets, you can mess around with political messages,” says aviation consultant Richard Aboulafia. “But if the market takes over, the market takes over.”
China understands its carriers will have to jostle with rivals worldwide for delivery slots years from now. Irish discount carrier Ryanair Holdings Plc in May locked in orders for as many as 300 Max jets that it will start flying between 2027 and 2033. In December, United Airlines Holdings Inc. snapped up 200 Dreamliners, Boeing’s most advanced widebody, as well as 100 737s. Air India Ltd. has committed to hundreds of aircraft as it seeks to rejuvenate its fleet, with the first planes due to arrive this year. And Saudi newcomer Riyadh Air and Turkish Airlines are in talks for their own mega-orders as they plot ambitious growth plans.
Adding to the scarcity of aircraft is a supply chain that’s still struggling three years after the pandemic convulsed global markets. Airbus was forced to cut back its delivery targets twice in 2022, handing over fewer jets than anticipated and aggravating an already tight supply of new planes. Calhoun expects the seller’s market for planes to last another half-decade or so as shortages of seats, engines and other parts continue through the end of next year.
Airbus still has the commanding lead it built in China—and around the globe—while Boeing was consumed by the Max crisis. But it will be many years before Commercial Aircraft Corp. of China, the country’s homegrown plane maker, can become a real challenger to Boeing, Cirium head Rob Morris says. That won’t happen until China’s answer to the Max, the C919, can prove its reliability flying heavy daily workloads and the Chinese company can build the jet on a mass scale. That suggests the nation’s airlines will need to start ordering the Max if they want to meet rising demand for seats. “I do see a credible path for Boeing to regain some element of market share in China, even if politics seem to be a huge roadblock,” Morris says.
Since January, Chinese carriers have pulled about three-quarters of the 97 Max planes they own out of storage. And in April the national aviation regulator removed the remaining technical hurdles to resuming deliveries of the 140 airliners sitting in Boeing’s storage lots. The final step in restarting Max exports is for China’s central economic planning agency “to simply say, ‘Deliver the airplanes,’” Calhoun says. “They’re already ordered, they’re on our tarmac—the airlines want them.”
Calhoun has mapped out plans to improve Boeing’s financial health by mid-decade, even if the trade impasse with China continues. The key will be getting Boeing’s factories into high gear without quality lapses and production hiccups, problems the company continues to face. But Boeing will need to kick-start sales to China if it wants to amp up deliveries of the 737 and the 787. JPMorgan Securities LLC analyst Seth Seifman notes that before the pandemic, China’s airlines were important buyers of the Dreamliner, in addition to the hundreds of single-aisle planes they had purchased. “Over time it is important for Boeing to get back there,” Seifman says. “Not just for the 737, but in terms of widebody orders.”
©2023 Bloomberg L.P.
