President Donald Trump’s announcement in China of an order for 300 Boeing jets is fake news out of a state visit, as most of the jets are not newly ordered. However, underlying the puffery is some reality: China will take 100s of Boeing jets in the years ahead.
The announcement by President Donald Trump and President Xi Jinping in China of an order for 300 Boeing jets with a whopping list price of $37 billion is the usual fake news out of state visits to China.
According to a person familiar with Boeing’s orders, who asked not to be identified because of the political sensitivities, most of the jets included in Thursday’s announcement — 40 larger twin-aisle aircraft and 260 single-aisle airplanes — are not newly ordered.
As is typical with state visits of foreign leaders to China, the announcement includes jet deals that were either ordered long ago or are not yet firm orders.
Boeing declined to comment, but the absence of any details in its news release suggests it’s more spin than actual news.
A separate news release from GE, which supplies engines for many of the planes ordered, identifies 10 of the twin-aisle orders as 787-9s for Juneyao Airlines. That order was first announced in January.
In this case, the puffery is not so much from Trump. It’s just the usual way of doing business in China — the same game whether it’s Trump or former President Barack Obama or the president of France visiting and whether the jet maker is Boeing or Airbus.
Underlying the stage-managed news is the reality for Boeing that China, the world’s largest commercial-aircraft market, will take hundreds of its jets in the years ahead. But the order details emerge from China’s closed business system only slowly.
A similarly fake announcement, for 200 Boeing airplanes, was trumpeted in 2011 when Xi’s predecessor, President Hu Jintao, came to the U.S.
It turned out that none of those 200 were new orders; it was just a repackaging of orders placed over the previous four years.
In 2015, on Xi’s first state visit to the U.S., when he visited Seattle en route to the White House, the order announcement was for 300 jets. Again, many of those 300 were orders Boeing had booked previously.
During a visit by Xi to Berlin in July, Airbus touted a $22 billion order for 140 planes from China, including 40 twin-aisle A350s and 100 single-aisle A320 jets.
Yet the Airbus order book for the year to date includes only 20 firm orders for the A350 from China, and those were ordered by China Southern last April.
The A320 order book contains just one significant Chinese firm order for the year, an order for 32 from Cathay Pacific.
China’s ordering process
Behind the staged puffery is this reality: China has been steadily buying Boeing jets and will continue to do so. Already, one-third of the 737s built in Renton go to airlines in China.
But China, as a centrally controlled economy, buys jets in a different way than other nations.
First, the Chinese government approves a large purchase from either Airbus or Boeing — it has a long-standing policy of buying about equal numbers from both manufacturers — through some centralized entity such as the state-owned China Aviation Supplies Holding company, based on its budget for the latest five-year plan.
This is not a firm order, and no money is paid out until the second phase, which is when the various Chinese airlines make separate pitches to the government for a piece of that order.
Once an airline gets the go-ahead from the government, funds will be released and the airline will pay the necessary deposit. Only then will Airbus or Boeing book that transaction as a firm order — though often it will be booked as an “unidentified” customer.
With this process of multiple approval stages, China orders take a long time and are often difficult to track.
Some actual order news
And Boeing did have some actual order news on Thursday, including a significant order from China that had nothing to do with the announcement in Beijing.
Among 69 new firm orders Boeing booked on Thursday was one from China Development Bank for 48 single-aisle 737s and eight widebody 787 Dreamliners.
Boeing said this is a new order that was not included in the 300 jets Trump touted.
According to market-pricing data from aircraft-valuation firm Avitas, that order is worth about $3.6 billion after standard industry discounts.
Also included in those firm orders on Boeing’s website Thursday were two 747s bought by the U.S. Air Force to be converted into Air Force One aircraft for the president.
Boeing is soaring high above Airbus in sales this year, with net orders for 605 aircraft versus 288 for its European rival.