Muilenburg: US-China trade war is a risk to Boeing 787 Dreamliner
The ongoing trade war between the United States and China is a risk factor for Boeing wide-body plane sales. The company’s CEO Dennis Muilenburg said that if unsolved, the situation threatens the 787 Dreamliner, as its production is dependable on the needs of Chinese customers.
Speaking at the Morgan Stanley 7th Annual Laguna Conference at Laguna Beach, California on September 11, 2019, Muilenburg expressed hopes that the U.S. and China will reach a trade deal, of which Boeing planes would be a part of. “We are paying very close attention to the U.S.-China trade deal, we [are] still hopeful one would be struck and airplanes will ultimately be a part of that. But that is a risk area until it is finalized”.
The reason behind such close attention is the company’s dependence on China's market for wide-bodies’ sales. The importance of Chinese market is well expressed in Boeing’s Commercial Market Outlook, which forecasts that Asia will become the world’s biggest travel market by 2038, while China will take up the spot of the biggest domestic travel market. In the next 20 years, 44,000 new commercial passenger aircraft will be needed globally, of which 7,700 ‒ in China, Muilenburg highlighted during the conference.
“We have reserved slots in our widebody production lines, both Triple Seven and 787, for Chinese orders and there is a dependency on Chinese orders ultimately coming through,” said Muileburg. For instance, the 787 production rate of 14 aircraft per month, while “flexible”, is a “clear preference” for Boeing. However, the 14/month rate is based on global Dreamliner demand estimations that also include Chinese orders.
The wide-body production more sensitive to order drop-outs as there are less flexibility to offer an aircraft for a different buyer. “These airliners tend to be more tailored for individual customers,” Muilenburg explains.
Reportedly, Boeing has a pending order from Chinese airlines for hundreds of planes. In June 2019, Bloomberg reported that Boeing was in the midst of negotiations with Chinese airliners “for one of the largest orders ever of wide-body jetliners”, potentially centered on 100 twin-aisle jets, including the 787 Dreamliners and the much anticipated 777X. No such deal has yet been finalized.
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