Boeing in Deal to Sell 300 Jets to China -- 2nd Update
September 23 2015 - 6:11PM
Dow Jones News
By Doug Cameron
Boeing Co. has agreed on terms to sell 300 planes to China and
plans to open a facility there to finish work on its 737 jetliner
that would allow it to boost production of the best-selling jet in
the U.S.
The announcements Wednesday, which followed a visit by China's
President Xi Jinping to a Boeing plant near Seattle, prompted a
backlash from unions and some lawmakers concerned that the
company's plan to shift more work overseas could affect jobs at
Boeing's main aircraft facilities in Washington state.
Boeing said it plans to team with state-controlled Commercial
Aircraft Corp. of China, or Comac, in building an
aircraft-completion center in China for 737 jets. The timing of
first deliveries and the location of the factory, where workers
will paint the fuselage and install seats and in-flight
entertainment systems on the 737, have yet to be finalized, Boeing
said.
The company said it wouldn't reduce employment on the 737
program in Washington, but union members protested outside the
factory during Mr. Xi's visit.
"I am disappointed that once again, Boeing is moving more
operations out of Washington state," said Democratic state Rep.
June Robinson in a statement, adding it should be easy for Boeing
to show net job creation in the state from the China plan.
Rival Airbus Group SE, which already assembles some A320 jets in
China, is also establishing a similar facility to finish work on
its A330 twin-aisle jets.
The new plant would be Boeing's first big manufacturing facility
overseas and would mark a milestone for its presence in China,
which is fast becoming its most important market.
The plane maker didn't immediately detail how many of the 300
jets in Wednesday's announcement, which have a sticker price of $38
billion before discounts, were already in its backlog. Boeing's
shares ended 4 p.m. trading down 1.7% at $131.67.
Boeing listed orders as of Aug. 31 for 157 jets designated for
Chinese customers, although analysts said numerous other existing
orders from China are included among "unidentified" customers in
its total backlog of 5,710 planes.
China's air-travel market has continued to grow despite the
cooling of the broader economy, with analysts forecasting it needs
several hundred additional planes a year to keep up with demand.
Boeing has projected that about 20% of demand for large passenger
jets over the next 20 years will come from China.
Boeing said China Aviation Supplies Holding Co., which orders
planes on behalf of a number of airlines, agreed to commitments for
190 of its single-aisle 737s and 50 widebody planes. The aircraft
leasing arms of Industrial & Commercial Bank of China Ltd. and
China Development Bank each agreed to buy 30 more 737s.
Boeing last month upgraded its forecast for China's plane demand
to 6,330 new jets with a sticker price of $950 billion over the
next 20 years. About 70% of those planes would be directed at
growth rather than replacing older aircraft, the company said.
Boeing and Airbus Group SE have a roughly 50/50 split of the
Chinese market and are deepening their ties with the country's
aerospace industry.
Scott Kennedy, a deputy director at the Center for Strategic
& International Studies, said the planned Boeing deals were
likely to be one of the few substantive announcements for U.S.
business from the state visit.
"Expectations are appropriately low," he said, adding that some
U.S. companies have been frustrated with the pace of economic
reform in China.
"They are not going to get in the face [of the president], but
they are passing notes behind the scenes," Mr. Kennedy said.
While U.S. heavy-machinery makers have been forced to curtail
production as demand from China slipped, the commercial-jet sector
is more robust.
China is now investing heavily to develop its own passenger-jet
industry, and Comac is developing the C919 plane to compete with
the Boeing 737 and Airbus A320. It includes engines from a joint
venture between General Electric and France's Safran SA and parts
from other Western suppliers. While years behind schedule, it has
secured commitments for more than 500 jets, orders that might
otherwise flowed to Airbus or Boeing.
China accounted for roughly a quarter of Boeing's single-aisle
jet deliveries this year and is expected to claim a large share of
future orders. But the company has lost ground in recent years to
Airbus, which delivered the first of its rival A320 jets from an
assembly plant in Tianjin in 2009.
Carlos Tejada and Jon Ostrower contributed to this article.
Write to Doug Cameron at doug.cameron@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 23, 2015 17:56 ET (21:56 GMT)
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