Vic, thank god for China. Do you think China will pay Boeing before they attack us?;)
>After three weeks of dire headlines from the aerospace world, Boeing finally has some good news to report.
Today, it is expected to announce an order for 30 Boeing 737s from the Chinese government. The narrowbody jets, which carry a total retail value of about $2 billion, would be delivered between 2002 and 2005.
The order is not expected to change Boeing's plans to cut up to 30,000 jobs by the end of 2002.
The long-awaited deal is to be closed with a formal signing ceremony this afternoon at the Department of Commerce in Washington, D.C., hosted by Secretary of Commerce Donald Evans and Alan Mulally, chief executive officer of Boeing Commercial Airplanes.
Zhang Guo Bao, vice minister of China's State Development Planning Commission, is expected to lead the Chinese delegation.
"Thank God we have them now," Boeing's senior vice president of sales, Larry Dickenson, said recently. "If there's a bright spot on the horizon, it's China."
Boeing officials, citing company policy, declined to comment further on the deal's status. It would be Boeing's first major order from China since 1997 and could not come at a better time, with U.S. and European airlines racking up huge losses after the Sept. 11 terrorist attacks. China has become an unlikely source of strength in a weak global aircraft market.
Last month, Boeing announced it will eliminate up to 30,000 jobs in the commercial-airplanes unit as production slips to 500 planes this year — down from an anticipated 538 — and to the low 400s in 2002.
The China order was included in Boeing's lowered forecasts, analysts said, so closing the deal is crucial to stave off further doubts about the company's near-term future.
More orders could be in the works. "We are optimistic there are going to be more airplanes coming down the pike fairly soon" for China, Dickenson said, "and they are airplanes the airlines have needed for some time."
One Wall Street analyst said there is widespread speculation that another order for 30 to 40 airplanes from China, including a large number of widebody aircraft, could be completed before the end of the year.
As part of the deal to be announced today, sources close to the negotiations said China Southern Airlines, the country's largest domestic carrier, will receive 20 new 737-800s to replace jets with leases that expire between 2002 and 2005.
China Eastern, which flies primarily Airbus jets, will get four 737-700s.
Additionally, Hainan Airlines will receive three 737-800s and Shanghai Airlines will get two 737-800s and one 737-700.
Boeing is also expected to disclose today that 10 orders attributed to "unidentified" customers earlier this year were from Chinese carriers — six 737-700s for Air China, two 747-400 freighters for China Southern and two 757-200s for Xiamen Airlines.
Assuming the deal goes through, China will account for more than 20 percent of Boeing's firm orders so far this year. And the long-term potential is undeniable.
China will require 1,764 commercial jets worth $144 billion over the next 20 years, according to Boeing forecasts, as it grows into the world's second-largest aircraft market behind the U.S.
Air travel within China is expected to grow more than 9 percent a year over that period as personal incomes rise and more Chinese take to the skies. Thus, narrowbody aircraft tailored for such routes, such as the 737, will be especially big sellers.
Dickenson has been selling planes to China since 1986, when he left Texas Air to become Boeing's vice president of sales for the Asia/Pacific region. He is now deputy director of sales and marketing for the entire commercial-airplanes group but continues to lead the Asia sales effort as well. His team has been working on the latest deal for more than two years.
It was nearly sealed in late March, but then a U.S. EP-3 spy plane collided with a Chinese fighter jet and made an emergency landing on Hainan island. The incident triggered a diplomatic standoff between the United States and China, and the Chinese government postponed the Boeing deal to express its unhappiness.
The order was resurrected only after reconciliatory meetings between U.S. Secretary of State Colin Powell and Chinese President Jiang Zemin in July.
The deal was then supposed to be announced Sept. 17 in Washington but was postponed after the terrorist attacks.
On a wall outside his Renton office, Dickenson has a framed jigsaw puzzle he uses to illustrate just how many factors come into play when Boeing deals with the Chinese.
The color-coded pieces are labeled "US-Sino relations," "Trade issues," "Communications," "Infrastructure support," "Industrial cooperation" and "Airlines preference for Boeing."
"If all of these parts are working, and they fit together, then we're going to be successful," Dickenson said.
Boeing has spent more than $300 million the past decade to help China expand its air-transportation system in response to a request from Jiang Zemin during a visit to Everett in 1993. Boeing has helped draft China's federal aviation regulations and trained more than 11,000 pilots, air traffic controllers and other industry personnel.
Boeing has also hosted three-month management-training sessions for middle managers of Chinese airlines who are now in senior decision-making positions.
"The Chinese believe transactions are momentary, but relationships endure through all time," Dickenson said.
Today's anticipated order is a clear sign of progress for Boeing in China, but it has been considered a fait accompli for months. The question now is, can Boeing produce enough new orders from China to offset weakness elsewhere?
"Much of it depends on how the rest of the world, particularly Asia, reacts to the weakness in demand in the U.S., as well as how protracted a decline occurs," said Heidi Wood, aerospace analyst with Morgan Stanley. "Presumably, Asia won't be immune from the ills of the U.S. and Europe, (and) U.S.-to-international travel is likely to be sharply cut back."
Su Liang, spokesman for China Southern, said his airline expects ripple effects from the troubles here.
"I think the whole air-transportation industry will be affected by the slowdown of the global economy. China Southern will be affected as well," Liang said. "Up to now, we have no plans for additional aircraft orders."
Nonetheless, Dickenson is upbeat. Today's pending order is for planes that were part of five-year plans Chinese airlines completed in 2000, he said, and Boeing is now talking to the Chinese about orders for the next five-year plan.
The Chinese had to forego new airplane purchases in the late 1990s because of the Asian financial crisis, Dickenson said, so there is pent-up demand. Wood and other analysts said subsequent orders would likely include 747 and 777 widebodies. |
