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Boeing Co. and Airbus Group SE are poised to reap a haul of aircraft orders from China’s airlines as central planners plot growth through 2020. The question is when.
For Boeing, the first deals could be unveiled this week when Chinese President Xi Jinping tours the company’s largest factory during a stop in Seattle. China’s government, which signs off on all plane purchases, often saves such disclosures for U.S. state visits as a reminder of the superpowers’ intertwined commercial interests.
“The fact that a leader like Xi comes to Seattle, which is not the center of the universe in the U.S., is a sign that he has some big announcement there that will make him look good,” said Adam Pilarski, senior vice president for aerospace consultant Avitas Inc.
Boeing may also reveal plans for a long-rumored industrial foray into the People’s Republic. The Chicago-based company has been exploring building its first non-U.S. airliner plant, for the completion and handover of single-aisle 737 jets to customers, according to a person familiar with the matter.
Xi’s journey begins Tuesday in Seattle with meetings and a speech to business leaders including Microsoft Corp. co-founder Bill Gates. On Wednesday, the president’s itinerary includes a stop at Boeing’s wide-body factory in Everett, Washington. Doug Alder, a Boeing spokesman, declined to comment on its order prospects.
“Boeing is still in Chinese minds very much what is great about American innovation and top-level engineering excellence,” said Michel Merluzeau, vice president for aerospace strategy and business development at consultant Frost & Sullivan. “For Boeing and Airbus, the Chinese market is going to be the fastest- growing, the one that’s going to absorb the most capacity over the next 15 to 20 years.”
Commitments from China on jet purchases would dispel the mystery surrounding some of the planes in Boeing’s order backlog. The U.S. company has more than 1,100 unidentified orders to about 720 for Europe’s Airbus, according to Jason Gursky, an analyst at Citigroup Global Markets Inc.
“Chinese airlines likely make up a good portion of this group due to the government’s control over airline order habits,” Gursky said in an Aug. 27 report.
China’s carriers are replenishing an order stockpile that has shrunk to only 2 percent of the backlog for Boeing and Airbus as the country soaked up 17 percent of industry deliveries since 2005, Gursky wrote.
Despite the devalued yuan and economic turmoil that has roiled China’s equity markets, airlines there are continuing to expand to keep up with the appetite for travel among its emerging middle class.
The country is nearing the end of its 12th five-year plan, which called for aircraft fleet increases at an 11 percent compound annual growth rate, according to Douglas Harned, an aerospace and defense analyst with Sanford C. Bernstein & Co.
Even a slower expansion should produce a booming business for the planemakers over the next five years. In a Sept. 14 report, Harned estimated that China’s carriers would need 700 new planes at a 7 percent growth pace, 1,000 at 9 percent and about 1,350 at an 11 percent tempo.
Most of the orders probably will be placed next quarter, after the Community Party Central Committee meets in mid- October, Harned wrote. Boeing could net orders for its 737 and wide-body 777, he said.
“There are active campaigns currently under way by both Boeing and Airbus in China because the need for more airplanes is clear,” Harned said. “We understand that Boeing and Airbus are holding some slots for Chinese orders.”
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This article was written by Julie Johnsson from Bloomberg and was legally licensed through the NewsCred publisher network.