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Source: wechat official account: Bu Yidao has been authorized to reprint

Write / Hu Yidao & Tiger knife

China’s three major airlines ordered nearly 300 Airbus aircraft

This news has not only become the focus of domestic media attention in the past two days, but also caused heated debate in the public opinion of the United States and Europe.

On the one hand, the scale and amount of this transaction is too huge. A total of 292 a320neo series airliners were ordered, with a transaction amount of US $37.2 billion. At least since the outbreak of the COVID-19, the largest passenger aircraft purchase transaction under the background of the heavy damage to the global aviation industry.

On the other hand, judging from the timing of the release of transaction information, it happened that the United States led European countries to launch the “plan to replace the ‘the Belt and Road’ initiative” at the G7 summit, after defining China as a “strategic challenge” for the first time at the NATO summit.

Therefore, some media in the United States and Europe exaggerated that Beijing was using this huge aircraft order to lay a “wedge” between the United States and Europe in order to alienate the “transatlantic alliance”. Others speculate that China wants to break the Western hype that “China and Russia are stepping up strategic cooperation”.

So, how should we treat this special “airliner transaction”?

01

In fact, it is not uncommon for China to place huge orders for the purchase of civil aircraft in the past.

For example, in November 2017, China Aviation Equipment Corporation and Boeing signed a batch purchase agreement for 300 Boeing aircraft in Beijing, including 260 737 series, 40 787 series and 777 series aircraft, with a total value of more than $37billion.

In March 2019, China Aviation Equipment Group and Airbus signed an order agreement for 300 aircraft in France. The total value of this agreement is 30billion euros (about 35billion dollars).

However, this was before the outbreak of COVID-19.

As we all know, since the outbreak of covid-19, the global tourism and aviation industries have suffered a devastating blow, while the performance of aircraft manufacturers and airlines is very poor. In the epidemic, some airlines had to reduce routes and flights, and even chose bankruptcy because of the closure measures taken by various countries.

Therefore, the actual effect of the huge US $37.2 billion passenger plane orders thrown out by China may be several times that of the same amount of aircraft orders in the past.

According to the Airbus website, the a320neo series is a short – and medium-range single lane airliner, with a range of more than 6000 kilometers. Most of the aircraft is used for domestic routes, and also can be used for international flights with relatively short flights, such as flights from Tianjin to Singapore, most of which are routes from China to Asian countries.

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Singapore’s Lianhe Zaobao reported that through this huge deal, China has released a signal to accelerate the resumption of air tourism. Moreover, on July 2, the Chinese Embassy in the United States released the latest version of the return guide. Compared with before, the policy of returning home has been relaxed again: simplify the health code procedure, no longer designate testing institutions, do not require antigen testing, etc.

Some scholars believe that this move shows that China may continue to focus on the development of domestic air tourism and gradually increase regional flights, but it will not vigorously promote international flights with long journeys in the short term. Moreover, the total orders of the three companies have reached a level close to that of the whole year before the epidemic.

According to the media, this transaction is the single order with the largest number of orders and the highest order amount in the history of the three airlines. Therefore, just from the perspective of industry and economy, China, like other countries in the world, is preparing for the recovery of the aviation industry.

China handed the order of nearly 300 airliners to Airbus. As another major manufacturer of international airliners, Boeing of the United States is of course very disappointed.

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Boeing announced by email on July 1 that it was “disappointed with the procurement cases of China’s three major aviation enterprises”. The statement said that as the largest U.S. exporter with a 50 year relationship with China’s aviation industry, “the continued restriction of U.S. aviation exports by geopolitical differences is disappointing”.

Obviously, the six words “geopolitical differences” contain a lot of information.

You can understand that Boeing is complaining that the US government’s geopolitical crackdown on China has led to the decision of “excluding American enterprises” by China’s three major aviation enterprises.

It can also be understood that Boeing is complaining that China “treats American enterprises differently” because of the current situation of China US relations and geopolitical differences.

Therefore, according to the analysis of overseas scholars, China will generally balance procurement between European and American manufacturers. China Southern Airlines, Air China and China Eastern Airlines have a certain official background, “this large-scale procurement is believed to have certain geopolitical considerations”. China may think that turning to European manufacturers can gain more room for negotiation in the overall interaction with Europe.

The media also said that China US relations are at the lowest point in more than 40 years. A series of issues, from the fierce fight in the field of trade to the tension in the Taiwan Strait and the South China Sea, have triggered “fierce competition” between China and the United States. Under such circumstances, the decision to purchase more Airbus aircraft is beneficial to Europe. It remains to be seen whether this will ease China EU relations.

Richard Aboulafia, an analyst at aerodynamic advisory, a US aerospace analysis company, believes that Airbus can further squeeze Boeing’s market position by giving priority to order delivery to Chinese aviation enterprises. “As you can see in other parts of the world, the Chinese are preparing for a comeback, and it is clear that the United States is at a disadvantage.”

In order to find excuses, an article published on the US politico website in the past two days also used a smear method to make up a story for China’s increasing reluctance to purchase Boeing aircraft. The article even claimed that “there are reports that EU Airbus has deep ties with the Chinese military industrial Consortium”.

Presumably, this kind of article seems to Europeans to be nonsense.

02

The decision made by China’s three major airlines to purchase Airbus aircraft is actually more a business decision.

Boeing has lost the aviation market in China and other countries in the world in recent years, mainly because of Boeing itself.

China grounded Boeing 737 Max aircraft in 2019 after two 737 Max aircraft crashes in Indonesia and Ethiopia killed 346 people.

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Boeing was questioned by a series of events. China Southern Airlines announced that it had eliminated more than 100 Boeing 737 Max aircraft from the company’s fleet plan.

However, since the 737 Max was grounded, Airbus has been far ahead of Boeing in terms of aircraft orders and market share. Reuters reported in January 2020 that the grounding of 737 Max affected Boeing’s overall performance in 2019, reversing its ranking with rival Airbus in terms of aircraft delivery.

In December 2021, Qantas, Australia’s largest airline, and Singapore Airlines signed agreements with Airbus one day to purchase 40 and 7 Airbus aircraft respectively. This was evaluated by American media as Boeing suffered two “betrayals” in 24 hours. It is worth mentioning that Qantas was once Boeing’s “loyal customer”.

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In addition, a320neo is an improved model of Airbus A320 series aircraft. Thanks to cabin optimization and further engine improvement, the single seat fuel efficiency of Airbus a320neo series aircraft is 20% higher than that of A320 series. Neo in the series name is the abbreviation of new engine option in English, that is, new engine option.

According to Airbus’ official website, by may 2022, the a320neo series had received more than 8000 orders from more than 130 customers. Since it was put into service six years ago, Airbus has delivered more than 2200 aircraft of this series. This also shows that this model is quite popular.

Why do the three airlines buy Airbus aircraft at the same time? There is another important reason.

The three airlines generally said that this aircraft transaction is in line with the company’s “14th five year plan” development and market demand. Based on confidence in the future development of the civil aviation industry, the company needs to plan and reserve the fleet capacity in advance, optimize the fleet structure and supplement long-term capacity.

China Southern Airlines said that the board of directors of the company believed that this aircraft transaction was in line with the fleet development strategy formulated in the 14th five year plan of the company. According to the company’s comprehensive assessment, the current period was a favorable window for aircraft introduction negotiations. The company took advantage of the current opportunity to strive for better aircraft purchase conditions, and this aircraft transaction helped to enhance the market competitiveness of the company

To put it bluntly, the current collective purchase of the three major airlines can obtain a large discount.

Moreover, it is not Americans who do not benefit from the purchase of Airbus aircraft by Chinese airlines. According to the media, the core systems of a320neo aircraft, such as engines and avionics, are all products of American suppliers, in which the American suppliers have obtained rich economic benefits.

And Airbus itself has production plants in the United States.

Some domestic netizens also asked, why can’t so many aircraft orders be allocated to domestic C919 aircraft and future c929 aircraft?

In fact, the C919 has received more than 800 orders of various types. Although Chinese people very much hope that this domestic airliner can be quickly expanded and strengthened, and the production speed can be accelerated, we all know the consequences of encouraging the growth of seedlings. On the one hand, C919 needs some time to obtain airworthiness certificates in European and American markets. On the other hand, the current C919 production capacity itself is limited.

With regard to c929, on June 7, Russian Minister of trade and industry manturov just said that the cr929 jointly developed by China and Russia is being redesigned to no longer rely on western parts. In less than a month, this wide body machine project has changed again.

Russian Deputy Prime Minister Yuri Borisov said recently that the joint development projects with China “have not developed in a direction suitable for us”. Some media said that perhaps Russia is considering giving up the cr929 wide body airliner project in cooperation with China.

This is enough to see that the development of anything is not plain sailing. We have always adhered to the attitude of seeking truth from facts.

03

Aviation expert zhangbaoxin analyzed that the Airbus aircraft purchased by China’s three major airlines this time is a single channel, 150 seat aircraft. This type of aircraft is the main operating force of major airlines in China at present. Therefore, the update frequency and purchase quantity are relatively large, and the amount involved is also relatively high.

For the 150 seat model, there is actually no other choice in the market, except Boeing 737, only Airbus 320. Faced with such a “one of two” situation, airlines will naturally choose mature models in the market without major problems. After the accident of Boeing 737max a few years ago, the safety problem has not been completely solved. At present, the United States and Europe have allowed 737max to go around, but this model has not been in China so far, because it does not meet the relevant requirements. Moreover, after the missed approach of 737max in Europe and the United States, there have been many accident symptoms. Therefore, at present, we adhere to the principle of prudence. Obviously, we will not make a rash purchase decision for Boeing 737max.

Zhangbaoxin believes that Boeing’s reply is an excuse. Boeing now explains this, in fact, for two purposes: first, to avoid a positive response to why the 737 problem has not been solved so far; Second, as a commercial company and the largest military industrial complex in the United States, Boeing has always had a great influence on the U.S. Congress. It also wants to take this to show that it does not want to see frictions in Sino US trade that hinder Boeing’s normal profits. At the same time, we also hope that the Chinese side will give a reply. If the 737 problem is solved, can we continue to purchase other Boeing models?

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Lu Xiang, an expert on American issues at the Chinese Academy of Social Sciences, believes that such large-scale procurement is often related to bilateral political relations and atmosphere. Generally speaking, there are two kinds of trade between countries, which are essentially related to political relations. One is the trade of bulk commodities such as energy. The energy trade agreement is not only signed for decades, but also involves long-term investment in corresponding infrastructure, so we must judge the medium and long-term political risks; The other is high-value products such as aircraft. On the one hand, the unit price is very high, on the other hand, the service life is long, and it involves long-term parts supply and maintenance services. The unit price of Boeing 737 and Airbus 320 is about US $200million, and they will be used for at least 30 or 40 years. Therefore, the stability and predictability of political relations must also be considered in the purchase of such goods.

Lu Xiang believes that Boeing should blame the U.S. government and Congress most now. It should come forward to alleviate the geopolitical risks caused by the U.S. competition and even hostile policies towards China, rather than blame China as a buyer. Boeing, as a US military giant, has a deep-rooted relationship with the government and Congress, and takes a huge defense budget every year. It does not go to the US government and Congress to reason, but yells at China, which is obviously unreasonable.

As for the comment that China is trying to provoke us European relations, Lu Xiang said that we are not trying to win over others, but because of the unilateral measures of the United States, which leads to the international consensus that such a transaction with the United States faces great political risks and uncertainties. Since the United States can concoct the “Xinjiang issue” out of nothing and restrict the import of Chinese Xinjiang products by legislation at will, who knows whether the U.S. Congress suddenly wants to throw out another legislation to restrict the export of aircraft or parts from the United States to China? Can the contract we signed with Boeing be effectively implemented? I’m afraid I can’t even get the deposit back. In the final analysis, erratic American politics is the most dangerous.

Lu Xiang predicted that if Sino US relations are not improved for a long time, Boeing’s sales to China will inevitably face an increasingly bad situation in the future. Even a possible situation is that China mainly purchases Airbus products, while strengthening C919 production capacity, forming a situation of “made in China + imported from Europe”. And it is estimated that by 2030, the demand of China’s aviation industry for this type of aircraft will be at least several thousand, and the procurement scale will be very large. The world is optimistic about China’s aviation market. If Boeing really wants to profit from the Chinese market, it is better to make full use of its strong government relations department and do more to build political trust between China and the United States. If there is no political trust, such a “big deal” as aircraft is indeed difficult to become a sustainable trade behavior.

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