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Boeing eyes the long game with new China facility

Boeing delivered its first aircraft outside of the US for the first time on 15 December, with a 737 Max 8 to Air China from its newly opened completion and delivery centre in Zhoushan, as trade tension between US and China simmers on.

The aircraft was built and painted at the manufacturer’s 737 factory in Renton, before being flown to China for interior installation. The completions centre is a joint venture with Chinese airframer Comac, while the delivery centre is wholly-owned by Boeing.

When fully up and running, the Zhoushan facility will install interiors and paint liveries. It will have about 300 employees and complete and deliver 100 737 Max aircraft annually to Chinese customers.

HUGE MARKET

The 100 acre facility, adjacent to the Zhoushan Putuoshan International airport, was first announced in September 2015 during China president Xi Jinping's visit to the US and before the election of US president Donald Trump. It marks a new level of work that Boeing is outsourcing to China, as it seeks to capture part of the country's estimated demand for 7,700 new aircraft over the next 20 years.

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Paul Lewis/Boeing

For years, Boeing stuck to the rhetoric that it did not need to set up a local completions or manufacturing facility to do business in China, and that it will instead grow its presence by deepening partnerships across the country. Airbus, on the other hand, set up an A320 final assembly in Tianjin in 2008, and further expanded its presence in 2017 with the opening of an A330 completion and delivery centre in the city.

About one in four Boeing aircraft now goes to China. For the 737 that number is even higher: one in three. The US manufacturer has so far delivered 78 Max aircraft to 13 Chinese customers, and is on track to deliver 200 planes into the Chinese market this year.

PLAYING THE LONG GAME

Boeing China president John Bruns concedes that the US-China trade tension has made its business “challenging”, but is optimistic that the company will work through the situation and continue to find success.

“This project in Zhoushan is an enduring statement of our commitment to the Chinese market and to our customers here. We just have to keep our eye on the long game in China,” he told reporters in a call ahead of the Air China delivery.

“We continue to encourage the two governments to engage in talks, resolve the differences that exist. I acknowledge it’s a challenging environment, but we want to stay focus on the long terms, stay focus on the relationship with our customers, which we’ve seen no change and no impact on.”

With Comac as its partner in the completions centre, Boeing is also collaborating with a competitor. The Chinese manufacturer is developing the C919 narrowbody, aimed at competing against the 737 and the Airbus A320. Comac is also partnering with Russia’s United Aircraft Corporation to build a widebody aircraft.

COLLABORATE AND COMPETE

“It’s simply about the market. The market size is just huge at $1.3 trillion. If we’re going to put a completions centre anywhere, this is the place where it makes sense to do it,” says Bruns on the rationale behind the tie-up with Comac. Boeing is also forecasting a $1.5 trillion services market in China.

“We’re not afraid of competition. We’re going to continue to focus on innovation to meet our customers’ needs.”

Boeing would not give a timeline, but says that the centre will have a gradual ramp up to eventually complete 100 aircraft annually. It adds that moving the completion work to China will also free up some capacity as Renton raises its build rate to 57 a month next year, from the current 52.

On its long-term vision for the centre, Boeing says there are no plans yet for it to work on widebody aircraft.

“The centre is a pretty big statement about our commitment to China and our market here. So many 737s are needed here… we’re not only going to deliver the Max 8 but the whole Max family all the way to Max 10… we’re just going to stay focus on getting those up and running here.”

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