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Boeing CEO Dennis Muilenburg delivers the keynote at the SAE Aerotech Congress

Boeing Sets 300-Plane Order, Plant with China

Sept. 23, 2015
Despite the continued economic slowdown in China (did you see that new 47.0 PMI?!), Boeing shows how important the market is with a massive plane order and a new factory to build its 737s.

SHANGHAI — Boeing has reached deals with Chinese firms to sell 300 aircraft and set up a completion center in China, state media and its local partner said Wednesday, as President Xi Jinping began a visit to the United States.

The massive order, which was not immediately confirmed by Boeing, demonstrates the vital importance of the Chinese market despite a growth slowdown that threatens to slow the expansion of air travel.

The state-owned Commercial Aircraft Corporation of China (COMAC) also reached an agreement with Boeing to set up a “completion center” in China for its narrow-body 737 airliners, Xinhua said.

It represents a step-up in Boeing’s competition in China with European rival Airbus, which already has a manufacturing presence there.

The Xinhua report, datelined from Seattle where Xi started his first U.S. visit on Tuesday, gave no details of the models bought by a group of Chinese companies or the value of the sale. Aviation analyst Shukor Yusof described it as the biggest ever order by a country.

Xi is due to visit Boeing’s main airplane factory in Washington on Wednesday.

“China’s rapidly growing aviation market plays a crucial role in our current and future success,” Boeing chairman Jim McNerney said in a statement last week.

COMAC confirmed to AFP that it will set up a joint venture with Boeing for interior completion, painting and other delivery support services for Chinese customers. “This shows cooperation between Boeing and a Chinese enterprise has been lifted to a major-manufacturer level,” it said in a statement.

The wording echoes the “new model of major country relations” phrase that Chinese officials use to describe ties with the United States, suggesting parity between the powers.

China is expected to add 6,330 new aircraft worth $950 billion to its commercial fleet by 2034, Boeing said last month in its annual China Current Market Outlook.

“The emerging middle class in China is helping to boost demand,” Mohshin Aziz, an analyst at Malayan Banking Bhd., told Bloomberg News. “Most of the planes ordered will be for growth and very few will be for replacement.”

A Shift for Boeing

A completion center in China for the medium-range Boeing 737 will be the firm’s first outside the United States.

European rival Airbus already has a final assembly operation for medium-range Airbus 320 aircraft in the northern port city of Tianjin, and plans to open a completion and delivery center for long-haul A330s.

But the move could be controversial for Boeing at home. Ray Conner, Boeing Commercial Airplanes CEO, wrote in a Tuesday memo to employees that it will not result in layoffs at its Washington plant, Bloomberg News said.

A Tuesday report by the Shanghai Securities News said plans for a Boeing facility in the eastern Chinese province of Zhejiang have already been submitted to the central government for approval.

COMAC is already developing a Chinese narrow-body, the C919, as well as a smaller regional jet, the ARJ21, in the commercial hub Shanghai. 

Shukor, with Malaysia-based Endau Analytics, said China was unique in that orders came from the government and planes were then distributed to the airlines and leasing companies.

“To put it simply, it’s a trade-off,” he told AFP. “China buys 300 aircraft and Boeing builds a plant in China in return.”

Shukor said China was leveraging the rivalry between Boeing and Airbus to get the best of both worlds in developing its own aircraft manufacturing.

It was not immediately clear whether all of the 300 sales that Xinhua reported were new, or if some represented confirmations or more detailed disclosures of previously announced orders. But one of the buyers, China Development Bank Leasing, said in a statement it had signed a deal for 30 Boeing Next-Generation 737-800 aircraft valued at $3.0 billion.

Other Chinese participants in the purchase deal include China Aviation Supplies Holding Co. and ICBC Financial Leasing Co., which will buy 30 Boeing Next-Generation 737s, state media said.

By Bill Savadove

Copyright Agence France-Presse, 2015

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Agence France-Presse

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