Boeing China order worth $37 billion part of ‘old deal’

Bloomberg

Eager to show he can narrow the trade gap with China and create jobs at home, US President Donald Trump touted an order for 300 Boeing Co. planes. Yet the bulk of the deal announced in Beijing was old news.
The order, with a list value of $37 billion before customary discounts, consists mostly of previous agreements, officials with knowledge of the matter said. The pact is largely for jets that have been parts of deals since 2013, said one of the people, who asked not to be named because he wasn’t authorised to speak to the media.
It “would have been surprising if something was not announced,” said Will Horton, a Hong Kong-based analyst at CAPA Centre for Aviation. “Three hundred aircraft for China is supermarket shopping, not Costco stockpiling. There will need to be more orders soon.”
Trump’s signing ceremony with Chinese President Xi Jinping underscores the political stakes as the US president seeks to demonstrate his ability to win large contracts for the country’s biggest manufacturers. Most of the roughly 15 agreements in various industries are nonbinding deals that could take years to materialise, if they do at all. Last month, Singapore Airlines Ltd. signed a $13.8 billion Boeing order at a presentation witnessed by Trump and Singapore Prime Minister Lee Hsien Loong.
State-owned China Aviation Supplies Holding Co. announced its order for 260 narrow-body Boeing jets and 40 wide-bodies. Chicago-based Boeing declined to say whether the contracts were new. Its website lists more than 1,000 orders from undisclosed clients. China Aviation Supplies didn’t respond to requests for comment.
Separately, General Electric
Co signed three deals valued at $3.5 billion as part of Trump’s visit, including engine supplies to Juneyao Airlines Co. and ICBC Financial Leasing Co.
Chinese airlines have been
on a plane-buying spree from Boeing and Airbus SE amid expectations that the country will overtake the US as the largest air-travel market in five years.
Boeing in September raised its 20-year forecast for aircraft demand in China as the nation’s growth and an expanding middle class boost air travel. The planemaker expects that China needs 7,240 new planes valued at almost $1.1 trillion in the two decades through 2036.
China previously has placed large orders through a centralised buyer before dividing them up among airlines and leasing companies, including a $22 billion deal China Aviation Supplies announced in July. During a visit by Xi to Berlin in July, Airbus said it won a $22 billion order to supply 140 planes to China, including 40 wide-body A350s and 100 of its narrow-body A320-series jets.
In September 2015 Boeing landed $38 billion in plane orders and commitments from Chinese carriers and lessors when Xi made his first state visit to the US. That agreement included orders and commitments for 190 single-aisle 737s and 50 wide-body
jetliners, without identifying customers. Air China Ltd, China Eastern Airlines Corp, China Southern Airlines Co—the three biggest state carriers—together plan to add more than 600 aircraft through 2020.
Air China and China Eastern intend to introduce 167 and 191 aircraft respectively through 2019, while China Southern has plans for almost 300 more planes by 2020, according to the companies’ financial statements.
China Southern said last month it signed a contract to buy 38 Boeing planes—eight 777s and 30 737s—at a list price of $5.65 billion.