China Considers Excluding Boeing 737 Max From Trade Deal




 

(Bloomberg) -- China is looking at excluding Boeing Co.'s troubled 737 Max jet from a list of American exports it would buy as part of a trade deal with the U.S., people familiar with the matter said.

Boeing jets were featured on a draft list of American products China would buy to reduce its trade surplus with the U.S., the people said, asking not to be identified discussing private deliberations. Now, safety concerns are pushing China to examine whether to cut the 737 Max from the list altogether or replace it with other Boeing models after the crash of a plane operated by Ethiopian Airlines led to the aircraft being grounded worldwide, they said.

A reduction in aircraft purchases could make it harder for China to fulfill an offer it's said to have made to pare its $300-billion-plus annual goods trade surplus with the U.S. over six years, and potentially delay any overall agreement between the two countries. Worth billions of dollars and a key U.S. export, planes would likely be a key component of any commitment by China to buy more American goods, along with soybeans, meat and natural gas.

China's Ministry of Commerce, which is in charge of the nation's trade talks with the U.S., didn't immediately respond to a request for comment. A Boeing representative declined to comment.

Boeing rose less than 1 percent to $373.43 at the close Tuesday in New York. The company's market value has tumbled about $28 billion since the Ethiopian Airlines crash.

For Boeing, China's exclusion of Max purchases in a trade deal would mark another setback for a company that's reeling from a crisis of confidence over its top-selling plane, which accounts for almost a third of its operating profit.

Chinese airlines made up about 20 percent of 737 Max deliveries worldwide through January, according to Boeing's website. China Southern Airlines Co. has 16 of the aircraft, with another 34 on order. China Eastern Airlines Corp. has 13, while Air China Ltd. has 14, according to Boeing. Other Chinese airlines that have bought the Max include Hainan Airlines Holdings Co. and Shandong Airlines Co.

The 737, which first entered service in the late 1960s, is the aviation industry's best-selling model and Boeing's top earner. The re-engineered Max version has racked up more than 5,000 orders worth in excess of $600 billion, including planes that have already been delivered.

The model duels with rival Airbus SE's A320neo family in a global, head-to-head competition for sales. While the European planemaker is increasing narrow-body output at its plant in Tianjin and elsewhere, the 737 Max's grounding has no bearing on Airbus demand, Chief Commercial Officer Christian Scherer said Tuesday at an event in Taipei.

Most of China's airlines count the government as its top shareholder and aircraft purchases are often coordinated by state agencies including the Civil Aviation Administration of China and National Development and Reform Commission. No other country has more demand for aircraft than China, which is estimated to seek 7,690 new planes worth $1.2 trillion in the 20 years through 2037, according to Boeing's latest forecast.

--With assistance from Kyunghee Park, Dong Lyu and Debby Wu.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net;Jenny Leonard in Washington at jleonard67@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, ;Jessica Zhou at jzhou75@bloomberg.net, Ville Heiskanen

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

COMMENTS

More Related News

Honeywell evaluating revenue potential from Boeing
Honeywell evaluating revenue potential from Boeing's next aircraft launch: CFO

Boeing has signaled that the proposed new mid-sized jetliner, known as NMA, will accelerate its drive to diversify beyond airframes and into services such as repairs and maintenance, where parts suppliers make much of their revenue. "If Boeing decides to move forward on the NMA ... we feel like we have got some very competitive offerings that we could provide on a platform," Lewis said. Honeywell makes auxiliary power units, cockpit avionics and flight management systems for the aerospace industry.

Barr Plans News Conference Thursday on Mueller Report's Release
Barr Plans News Conference Thursday on Mueller Report's Release

The almost 400-page report will be delivered to Congress between 11 a.m. and noon, according to a Justice Department official. The document will be closely scrutinized for any new disclosures of contacts between President Donald Trump's presidential campaign and Russian operatives who interfered in the 2016 election, as well as any evidence that would show whether the president sought to obstruct justice by interfering in the probe. Deputy Attorney General Rod Rosenstein, who appointed Mueller, also will take part in the news conference.

Boeing 737 MAX software upgrade
Boeing 737 MAX software upgrade 'operationally suitable': FAA panel

More than 300 Boeing 737 MAX jets have been grounded worldwide after nearly 350 people died in two crashes, one in Indonesia in October and another in Ethiopia last month. Boeing has been announced a planned software update on the 737 MAX to prevent erroneous data from triggering an anti-stall system

Trump
Trump's Trade War With China Doesn't Look Like a Win

(Bloomberg Opinion) -- In March 2018, President Donald Trump uttered his famous declaration that "trade wars are good and easy to win." A little more than a year later, it looks as if Trump is losing the trade war he started with China.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Latin America

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.