Posted on 12/01/2018 11:44:08 AM PST by Simon Green
Boeing has officially delivered 2,000 aircraft to China. The latest plane — a Boeing 737 MAX operated by Xiamen Airlines — marks yet another milestone for Boeing and China. It took Boeing four decades to reach the first 1,000 deliveries. But with China’s rapid growth rates, this new milestone was reached in just five years. Boeing says that currently one out of every four aircraft it’s producing is headed to China.
Boeing has heavily invested in China, now the second largest economy on the planet. Its work there reportedly accounts for $1 billion in economic activity in China. Every Boeing plane currently on the market has parts built in China, including the 737 MAX, 777 and 787 Dreamliner. Boeing and the Commercial Aircraft Corp. of China now have a joint facility that will be finishing — installing interiors and handling exterior paint work — and delivering planes to carriers based in China. The facility is due to deliver its first 737 MAX some time in December 2018.
And it’s no surprise that Boeing is investing heavily in China. Boeing forecasts that China will need 7,690 new aircraft by 2038. This number is way up compared to when the company delivered the 1,000th plane just five years ago. At that milestone, Boeing was estimating that China would need only 5,260 new aircraft by 2033.
This is great news for Boeing investors, as the order log should have plenty of work during the next 20 years. Although China’s economy does seem to be slowing down, it’s still reporting growth rates that would be the envy of most countries.
With one in four of Boeing’s planes being sent to China, the company plans to continue investing there. Now that there are really only two players in the commercial aviation space — with Bombardier selling the C Series to Airbus — it’s clear that Boeing is firmly focused on keeping the throttles forward when it comes to China.
Airbus, however, delivered its 1,000th aircraft to China in 2013 — the same year as Boeing — but is only on pace to hit the 2,000th unit in 2020. It’s clear that Boeing is well outpacing its only real competition in the Chinese market. Overall, this comes as great news for the people Boeing employs in China, not to mention Boeing’s investors.
Sure, there are some C-suite staff who look at the overall health of the company, but they’re not many. Why? Not because they are greedy (although most are), but partly because of survival. Take the credit crisis ten years ago ...if a CEO of a major bank was not feeding at the trough of bad mortgages 12-13 years ago, he/she would have been FIRED for not posting the great returns that other banks were showing. Yes - partaking in NINJA loans, crazy CDOs and even crazier CDS’ would eventually result in hell 2 years later, any companies like AIG, Lehman and Countrywide paid the piper in full ...but if they had not participated in the madness two or three years later (actually, even before say from 2002 even) they would have been fired.
Same thing for Boeing. If the CEO decided he did not want to sell to China, Airbus would fill the orders. And his own shareholders would demand for his head when his numbers lagged behind Airbus’.
It’s a devilish bargain. Win now, and lose in the future. Or lose now, get replaced with someone more willing to win now, and still lose in the future.
Some of the decisions made are due to greed. Many even. However, a good number of them are due to game theory. It’s a devilish bargain, and many FReepers who as CEOs would have ‘done good for the company and country’ would have not lasted six quarters. Sad, but true.
Some spelling and other mistakes in my post. Mea culpa.
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