Boeing eyes major aircraft order under any US-China trade deal

Boeing Co said that an aircraft order from China could result from any deal to end a year-long trade war between the world’s two largest economies.

Speaking to Reuters at the planemaker’s widebody aircraft factory in Everett, Boeing Chief Executive Dennis Muilenburg cautioned that it was “tough to predict” the timing of a potential trade deal between the United States and China.

Chicago-based Boeing calls itself the top US exporter and has delivered more than one out of every four jetliners it made last year to the customers in China, where it forecasts demand for 7,700 new airplanes over the next 20 years valued at $1.2 trillion.

“It’s been challenging,” Muilenburg said. “But I think ultimately they will find a solution because of the mutual interest, and we think our airplane business will be part of that ultimate solution.”

“We are hopeful that if there is a trade solution, it will be beneficial to airplane orders as well,” he added, saying a healthy aerospace industry benefits both countries.

But tit-for-tat tariffs between the United States and China, which is poised to overtake the United States as the world’s largest aviation market in the next decade, have slowed the global economy and forced Boeing to walk a geopolitical tightrope for more than a year.

On the one hand, Boeing has been increasing its industrial footprint in China as it aims to increase its sales lead over Europe’s Airbus in Asia. On the other hand, executives have taken pains to avoid clashing with US President Donald Trump who has repeatedly said the United States must take steps to protect American jobs and technology.

Analysts say China has been slow to order planes from both Boeing and Europe’s Airbus as its economy wavers and it holds off major procurement decisions pending the outcome of the dispute with the United States.

“It’s hard to predict whether or not a successful deal will be achieved,” Muilenburg said. “China’s been not ordering airplanes over the last year, year and a half. That pent-up demand signal is still there. The airplane need is real.”

Reuters reported in March that the prospect of a major potential order for more than 100 jets, worth well over $10 billion at list prices, had increased as Washington and Beijing cited some progress in talks to resolve their months-long trade war.

Boeing’s plane orders have also been clouded by the grounding of the planemaker’s fast-selling 737 MAX jetliner in the wake of two crashes that killed 346 people.

Muilenburg’s comments come after China’s foreign ministry said on Tuesday it hopes Washington can create conditions for talks, but that it had not heard of any recent telephone call between the United States and China on trade.

Trump on Monday predicted a trade deal with China, citing what he described as increasing economic pressure on Beijing and job losses in China. His comments calmed global markets that have been roiled by new tariffs. He also appeared to back off of his threat to order US companies out of China.

“We’ve been advocates for finding a balanced solution,” Muilenburg said. “We are going to continue to do that.”

Muilenburg said that the financial fallout from the grounding of its 737 MAX jetliner would not slow the world’s largest planemaker’s appetite for deals in the higher-margin aircraft services sector.

“Our ability to do those continues to be strong. We have the financial capacity to manage the MAX situation and continue to make our investments for the future,” he said.

Boeing’s fastest-selling, single-aisle jet was grounded in March after two deadly crashes. The company is working on a fix for software at the center of both crashes and is aiming to get the jet back in the air as soon as October. It has completed around 560 flights with the new software.

“We still anticipate getting the return-to-service early in the fourth quarter,” Muilenburg said. “We are making progress on that schedule.”

Meanwhile, Muilenburg aims to expand the services business that includes aircraft parts, maintenance and analytics to $50 billion in revenue in a decade from its 2018 revenue of about $17 billion.

Boeing bought parts distributor KLX last year for $4.25 billion including debt, in its largest deal since merging with McDonnell Douglas in 1997. Boeing and rival Airbus are pushing into the market for repairs, maintenance and analytics as airlines consider outsourcing more of such services in an effort to keep a lid on costs.

Boeing has had to divert resources to the 737 MAX from across the company as it works to win approval from aviation regulators for its software upgrade.

In April, Boeing dropped production to the current rate of 42 aircraft per month after halting deliveries of the MAX to airlines, cutting off a key source of cash and hitting margins. The total cost of the 737 MAX crisis has grown to more than $8 billion and counting.

Reuters