Kelly Ortberg, chief executive officer (CEO) of U.S. aircraft maker Boeing, accompanied U.S. President Donald Trump on his China tour, but Boeing shares plunged after the order volume fell short of market expectations.
On the 14th (local time) on the New York stock market, Boeing shares closed at $229.21, down 4.74% from the previous trading day. During the session, they fell as low as $227.50. Despite securing new orders from China, the share price fell instead.
Earlier that day, President Trump said in a Fox News interview, "One of the things Chinese President Xi Jinping agreed to today is an order for 200 aircraft," adding "Boeing aircraft." However, he did not specify which models were included.
But the market reaction was cold. That is because market expectations were much higher, with U.S. investment bank Jefferies projecting China's Boeing orders at up to 500 aircraft. In particular, anticipation grew further after news broke that CEO Ortberg would accompany the trip.
George Ferguson, an analyst at Bloomberg Intelligence, said, "An order for 200 aircraft is disappointing for a market that expected more than 300, especially detailed breakdowns by model," adding, "In the past, there have been quite a few cases where aircraft purchase agreements by the Chinese government did not lead to final contracts."
Matt Akers, an aerospace analyst at BNP Paribas, also told Reuters, "Investors interpret the current announcement as smaller than expected," adding, "There remains a possibility of additional orders during this visit to China."
China has not disclosed a large-scale Boeing order contract since President Trump's 2017 visit to China. In 2020, it said it would purchase $77 billion (about 115 trillion won) worth of U.S. products, including aircraft, but it failed to fulfill the pledge due to the impact of COVID-19. In the meantime, China's aircraft demand shifted to Airbus, Boeing's rival, and Boeing ceded a significant portion of its market share in China.
However, considering that Boeing has effectively failed to win new orders in China over the past decade due to U.S.-China trade tensions, some say the order for 200 aircraft is a signal of the return of U.S.-made aircraft to the Chinese market. CEO Ortberg also noted on a pre-trip earnings conference call that the visit "will be a meaningful opportunity for Boeing."
Bloomberg said, "For Boeing, this deal is meaningful in that it puts a period on years of negotiations with Chinese airlines," adding, "At the same time, it could serve as a turning point to end a long order drought in the world's No. 2 aviation market."
The key question is whether Boeing can secure additional orders from China. China is estimated to need up to 1,000 new aircraft in the coming years to cope with surging travel demand. However, with Airbus still highly influential and China accelerating the development of its own passenger jets, there is a view that it is uncertain whether future aircraft demand will translate into Boeing orders.