The American Boeing Company has recently been rocked by trouble after the Ethiopian Airlines accident. The deadly incident that happened early this month involved one of their latest planes, the Boeing 737 Max Jet. This plane was barely 4 months when it crashed just 6 minutes after takeoff en route from Addis Ababa to Nairobi, claiming the lives of 157 people who were on board. A similar incident had taken place last year October, involving the same model of a Boeing aircraft in Indonesia.
Consequently, countries all over the world have temporarily grounded the Boeing 737 Max from flying in their airspace citing safety concerns. After deliberations, the United States has also followed suit by prohibiting that particular aircraft from operating until the safety concerns are addressed.
Prior to these unfortunate developments, China had promised to increase its purchase of the United States products in a bid to close a trade deal. However, if China reduces the aircraft purchases, this could adversely affect its capability to fulfill the $300 billion-plus offer it made to the U.S. Further to that, it would lead to a further delay in the US-China trade deal.
Among other United States exports, planes could make a significant contribution to China’s intent to buy more American products. With the addition of gas, soybeans, and meat, the US-China trade deal would have a huge opportunity to flourish.
When approached for a comment on the issue, the Chinese Ministry of Commerce, which has been instrumental in spearheading Chinas trade talks with Washington was reluctant to respond. A top Boeing representative also kindly refused to make any remarks surrounding this issue.
Given that the Boeing 737 Max Jet was their top-selling aircraft, contributing massively to the company’s profit, Boeing has been hit hard. It was estimated that this particular plane made a third of its operating profit. A staggering 20% of the Boeing 737 max jet sales worldwide were attributed to the Chinese airline’s orders. This is according to a report released on Boeing’s website early this year.
The China Southern Airlines Co is said to have over 16 airplanes of the Boeing 737 Max in their fleet. Moreover, this airline had ordered 34 more planes of this model. Additionally, the China Eastern Corp has 13 of them while Air China Limited has 14. Nevertheless, these aren’t the only Chinese airlines that are known to have bought the Boeing 737 Max jet. Shandong Airlines Co and Hainan Airlines Holdings also have them in their respective fleets.
Boeing has rated the 737 model series, which first made its entry into the market in the year 1960s, as an all-time top seller. The plane has over the years outsold all its counterparts emerging as Boeings best earner.
Surprisingly, the modernized 737 Max version had been ordered over 5000 times. These orders are said to have amassed over a whopping $ 600 billion, an estimate that was done by Boeing in consideration to the planes that have already been delivered to different airlines.
The Chinese Government counts as a shareholder for most of the local airlines, which means that a majority of aircraft purchases is commonly done in coordination with the relevant state agencies. These include the Civil Aviation Administration of China as well as The National Development and Reform Commission.
When it comes to the demand for planes in the world, China is the global leader. In the next 2 decades, Chinese demand for planes has been estimated to hit 7500 aircraft. These new planes could be worth at least $1.2 trillion in a period of 20 years, through to 2037. This estimate is in accordance to the Boeing forecast.
As China ponders on whether to reduce their current aircraft purchased from the United States, they are also wary of the big essential gap that could be difficult to close as a US-China trade deal looms.
Finding an alternative product that could cost as much as the airplanes and fill the void may prove to be an insurmountable task. If, however, Boeing rectifies the problem bound 737 Max and wins the confidence of the Chinese Airlines once more, the US-China trade deal might proceed as anticipated.
Meanwhile, the United States will also be watching closely as they seek to reduce the ever-growing worrisome trade deficit between them and China.