As the trade war between the United States and China intensifies, major foreign media outlets report that Boeing is taking a direct hit. Boeing, the largest exporter in the United States and one of the world's largest aircraft manufacturers, is expected to fall further away from its goal of returning to profitability as orders from its largest customer, the Chinese market, have been halted, leading to a widening gap with competitors.
On the 15th (local time), The Wall Street Journal (WSJ) and Bloomberg reported that the Chinese government recently instructed its airlines to suspend new orders for Boeing aircraft and restrict the delivery of already contracted planes to require government approval. In addition, guidelines to halt additional purchases of U.S. aircraft parts have also been issued.
Accordingly, China Southern Airlines, the state-owned airline of China, recently halted the sale of 10 used Boeing 787-8 Dreamliners. These aircraft were scheduled to be replaced with new models suited for long-haul routes. However, as the United States and China imposed tariffs of up to 145% and 125% on each other, respectively, and the trade war escalated, China Southern Airlines decided to put its plans on hold due to the uncertainty surrounding transactions with Boeing.
Bloomberg reported that China Southern Airlines is one of the largest airline groups in the world, having transported a total of 165 million passengers and handled 1.8 million tons of cargo and mail last year.
According to WSJ, China accounts for one-fifth of global aircraft demand and is the largest market. Of the 130 aircraft Boeing delivered worldwide by March of this year, about 14% (18 planes) were delivered to Chinese airlines. If China halts aircraft deliveries, Boeing is estimated to suffer losses of approximately $1.2 billion (around 1.7 trillion won) this year alone. Previously, China halted aircraft deliveries after Boeing plane crashes in 2018 and 2019, only resuming deliveries last summer.
Even if China approves deliveries of Boeing aircraft, airlines may delay or cancel deliveries due to a decline in travel demand resulting from an economic recession and to avoid high tariffs. In fact, Michael O'Leary, CEO of the Irish low-cost airline Ryanair, stated in an interview with the Financial Times (FT) that he is considering postponing the delivery of 25 737 aircraft originally scheduled for delivery in August to next spring.
According to WSJ, Boeing currently has a backlog of about 5,500 aircraft, so immediate demand may not decline, but it is expected that the company's competitiveness in China will inevitably weaken in the long term. Airbus, Boeing's competitor in Europe, is already operating two assembly lines in China, widening the gap with Boeing in the Chinese market.
Boeing must also prepare for China's pursuit. Although the C919 model from China's state-owned aircraft manufacturer Commercial Aircraft Corporation of China (COMAC) is still in an incomplete stage and relies on several components from the United States, WSJ analyzes that there is a strong possibility of rapidly enhancing its competitiveness centered on the domestic market in the long term, aiming to expand its share in the global market.