Monday’s crash comes at an extremely pivotal time for Boeing as they were aiming to restart 737 Max deliveries to China after a three-year halt. Last year, Boeing Chief Executive David Calhoun said the company desperately needed new orders from Chinese airlines to compete with the recovery of the market. China was also the first to officially ground the 737 Max, which raises increased concerns for the future of Boeing’s relationship with China. COVID and the grounding of the aircrafts caused the company travel demands of China to increase and significantly lowered the demand for planes. Boeing’s stock has dropped over 50% since the end of 2019, slicing over $100 billion off their total value. Because of this, Boeing is in dire need of another jetliner order from China. Boeing has caught major momentum since the beginning of 2020 but resurrecting deliveries and taking new orders is essential for the success of the company. The last few years were not kind to Boeing but the future is still uncertain.
Boeing’s losses have also negatively impacted China as well. Before COVID, China relied heavily on Boeing’s production for their growing travel sector. This importance was highlighted by China’s response to President Trump’s tariffs. Rather than taxing Boeing jets in retaliation, China decided to only put a 5% levy on small U.S.-built aircrafts. Furthermore, China is unable to only rely on Airbus, Boeing’s European competitor, as there is a massive backlog of their jets. Chinese company Comar, however, has been developing a replacement for the 737 and is planning to enter it into service sometime in 2022. China’s command economy also allows it to require that airlines purchase from Comar over Boeing, potentially hitting Boeing with yet another blow.
Questions:
Do you think Boeing will bounce back as travel increases?
How does China's command economy impact the relationship with Boeing?
Sources:
https://www.cnbc.com/2022/03/23/black-box-found-from-boeing-passenger-jet-that-crashed-in-china-state-media.html
https://www.wsj.com/articles/china-eastern-plane-crash-complicates-boeings-china-relationship-11647968883
https://www.wsj.com/articles/boeing-swings-to-profit-on-defense-and-jet-sales-11627474051?mod=article_inline
https://www.barrons.com/articles/boeing-stock-had-a-terrible-2020-forget-2021-its-all-about-2024-51608888600
1 comment:
Boeing has kept the 737 body style since the 1970s or 1980s, and with the direction that air travel is going, it's time to abandon it. What Boeing has tried to do over and over (with varying degrees of success) is stick larger engines on the 737 so it becomes more efficient with longer range, but pilots and crews don't need to be retrained. They can produce them quickly and cheaply, and get units out the door fast. Since Boeing shifted its management around 20-25 years ago, and moved its headquarters to Chicago, it's become less and less of an engineering-focused company and that has showed with the incidents now and with the 737 MAX. Boeing may lose its name in air travel, and be overtaken by Airbus if it keeps this up. Boeing is learning that they are going to need to make an entirely new plane to compete with the A320Neo, and they haven't been quick enough. They made a mistake once, and now they made the same or similar mistake again. It's unacceptable, and without change (in upper level management and engineering practices as a whole) Boeing is headed down a slippery slope.
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