Boeing delivers first 737 from China plant
COMPANY STRONGHOLD IN CHINA THREATENED BY AIRBUS’ INVESTMENT
Boeing Co. has kicked off its industrial foray into China, handing over the first 737 Max completed in the country to Air China, looking past current, simmering trade tensions to a $2.7 trillion (Dh9.9 trillion) market opportunity.
The jetliner was the first to be delivered outside the US by the Chicago-based plane maker, although the aircraft for all intents and purposes bore a ‘Made in USA.’ label. It marked the debut of Boeing’s plane completion and delivery centre in Zhoushan, 145 kilometres southeast of Shanghai. The completion part of the facility is a joint venture with state-owned plane maker Commercial Aircraft Corp. of China Ltd.
The plant was set in motion before US President Donald Trump was elected, the ribboncutting risks being overshadowed by tit-for-tat tariffs with China. A three-month truce announced this month has been under threat since the arrest of Huawei Technologies Co.’s chief financial officer in Canada, after the US sought her extradition for violating Iran sanctions.
The Zhoushan facility, with roots on both sides of the Pacific, is emblematic of the balancing act for Boeing in China. The planemaker sold its first 10 jets there in 1972, after President Richard Nixon arrived aboard a Boeing 707. Chinese workers at the new plant will put the finishing touches on US-built planes flown over from a Seattle-area factory, before delivering them to local customers.
“This is a really exciting point in our history to have something of this scale here,” John Bruns, president of Boeing China, said yesterday. “It really demonstrates our commitment to this market.”
Robust demand
About one of every four jets that Boeing builds is bound for China, while the country’s airlines are the biggest buyers of the 737, and the manufacturer’s largest source of profit. China is expected to need about 7,700 commercial planes over the next two decades to connect an increasingly mobile middle class.
That represents $1.2 trillion in potential sales, while Boeing estimates the demand for services from maintenance to pilot training could create another $1.5 trillion market opportunity for Boeing, Airbus SE and home-grown rivals like Comac.
Boeing eventually plans to put finishing touches on 100 of its 737 Max planes each year at the new completion centre. The bulk of its workforce — about 75 people — are Boeing’s US employees temporarily stationed there to help new hires get up to speed.
Indeed, the plane delivered to Air China was painted in the US since that part of the Zhoushan facility isn’t yet operating, while the tasks completed on-site for its interior made for a “pretty limited work statement,” Bruns said.
Handing off light manufacturing to the new centre eventually will free up valuable capacity as Boeing charts 737 production increases well beyond the 57-month rate set for 2019. It only builds the narrowbody jets at a single site in Renton, Washington. Airbus has four such plants scattered around the globe for its competing A320 family of planes — including one in China.
But Boeing’s commercial stronghold in China is increasingly threatened by Airbus’s industrial investment, as well as the trade war stoked by Trump.
Boeing, the largest US exporter, has urged both governments to resolve their trade differences and protect aerospace, which generates about an $80 billion annual trade surplus for the US. Airbus has been assembling its narrow-body A320s in China for about a decade, recently expanding its Tianjin campus to include a completion and delivery centre for its wide-body A330s.
While Boeing has a sales lead over Airbus in China, the gap is narrowing. As of August 2018, Boeing has 1,670 planes in service in China, followed closely by Airbus with 1,598, according to CAPA Centre for Aviation.