Boeing’s China Problem

Boeing’s China Problem


This video was made possible by Skillshare. Learn new skills from more than 25,000 classes
for free for two months at skl.sh/wendover7. To, from, or through China, more than half
a billion passengers fly each year. By 2035, that number is expected to be 1.3
billion. It is one of the fastest growing aviation
markets in the world, is home to what is believed to be the future busiest airport in the world,
and is expected to soon surpass the US to become the single largest aviation market
in the world. Last year, a new aircraft was delivered to
a Chinese airline every 21 hours. That’s $35 billion worth of aircraft purchased
in a single year. All of this, however, represents a considerable
problem for the world’s largest aircraft manufacturer—Boeing. You see, the reason China is a problem for
Boeing is also part of the reason why China is already such an enormous market for them. While the US is resoundingly Boeing’s number
one customer, at least partially propped up by government defense contracts, China safely
holds the number two spot. Excluding North America, China, in fact, singlehandedly
earns Boeing more money than every continent in the world. Now, not only is China a fierce battle-ground
between Boeing and Airbus, even if Boeing has a slight overall edge in market share,
but the company now also faces a trifecta of issues potentially hindering its future
dominance in this ultimately crucial aviation market. The first of these issues has to do with Boeing
brand new yet beleaguered airplane—the 737 MAX. Prior to the MAX’s grounding, China was,
by a wide margin, the largest operator of this airplane. Its airlines had a total of 97 MAX’s while
US’ airlines, representing the second largest customer group, only had a total of 72. This is an aircraft particularly well-suited
to China’s geography. With a number of smaller, secondary or tertiary
cities, China’s airlines are increasingly focused on developing non-stop flights bypassing
the major hubs of Beijing, Shanghai, and Guangzhou, or fights to lower demand cities outside of
China. This is especially true given the huge number
of smaller airlines operating in China who have established themselves by setting up
hubs in some of the country’s smaller cities whose populations more recently started the
transition into the country’s middle and upper classes than those of the country’s
tier one cities. Of course, flying to or from these smaller
cities means lower demand for seats, however, the longer-range, smaller-capacity capability
of the 737 MAX perfectly suits this mission. That allowed Chinese airlines to set up, in
an economical manner, flights like Jinan to Singapore, Guangzhou to Lahore, Ürümqi to
Bangkok, or Hangzhou to Hotan—all five or six hours flights with minimal demand. The 737 MAX was an aircraft perfectly suited
for China and Boeing knew it. This suitability and focus was demonstrated
by Boeing’s decision to set-up an aircraft completion center in Zhoushan, China. While aircraft would continue to be primarily
assembled in Renton, Washington, they would be flown over to Zhoushan without the interiors
completed. In Zhoushan, their seats, overhead bins, and
basically the entire rest of their interiors would be installed by Chinese workers in this
Chinese factory. Having a ground presence in China would appease
the government, and by extension airlines, and the hope was that this would help convince
them to buy Boeing jets considering that their purchase provided Chinese jobs. This was especially necessary considering
that Airbus already had an even more extensive final assembly line in the country for its
competing a320 jets. Given the MAX’s suitability, though, Chinese
airlines bought an enormous number of these planes. In addition to the 97 already delivered, Chinese
airlines had almost 500 of them on order but then, of course, the MAX crashed, and then
it crashed again. China’s Civil Aviation Administration, eager
to maintain the country’s recent streak of aviation safety, quickly grounded the MAX
after its second crash making China the first country to do so. This was a rather shocking move as historically,
every country’s aviation regulator more or less just followed the lead of the American
FAA in these decisions. It was thought that, if the FAA said it was
safe, it was safe, an in this case, the FAA initially asserted their confidence in Boeing’s
737 MAX and chose not to ground it immediately. Now in the aftermath of this, the grounding
of the MAX has presented Beijing with three gifts. First, especially in the case of the state-owned
airlines and leasing companions, the Chinese have a much stronger negotiating position
than before with Boeing as the company works to regain the momentum it had before. Prices, which typically vary widely from airline
to airline and deal to deal, could end up lower. Secondly, China’s three largest airlines,
which are all state-owned, are asking Boeing for compensation for the grounding of their
jets. By extension, this is essentially the Chinese
government, the very one that holds the keys to the Chinese aviation market, asking Boeing
for compensation and, if Boeing doesn’t comply in what is possibly largely a symbolic
move, the Chinese government could decide to reduce future Boeing orders, potentially
in favor of Airbus. While Boeing is seemingly setting itself up
to offer compensation to airlines affected by the MAX’s grounding, whatever it gives
to the Chinese airlines, however favorable the company is with them, they will have to
match this precedent for their compensation with every other of the world’s affected
airlines. What could end up the most formidable MAX
challenge, though, is that the Chinese aviation regulator has now established itself as a
leader. It was them who made that first decision to
ground the jet that started the domino effect of other national regulators grounding the
MAX. Considering China’s regulator now successfully
flexed their muscle in this space, the American FAA, which has deep links to Boeing and has
allowed Boeing to essentially self-certify certain aspects of their new aircraft, has
lost some prowess in its role as, in a sense, “the world’s aviation regulator.” Therefore, not only will China’s regulator
likely take a more independent route in re-certifying the MAX once its issues are resolved, it will
also possibly feel free to make its own independent decisions on the airworthiness of future aircraft. This is a precedent that should have Boeing
concerned. Now, a smaller but significant second issue
for Boeing is the ongoing trade-war between the US and China. While Boeing has not yet encountered clear
implications from this trade-war, some speculate that the company could be used as a pawn. You see, China’s three largest airlines—China
Southern, China Eastern, and Air China—are all majority government owned and therefore
their orders can be used as a sort of political tool. To date, these three airlines’ fleets are
slightly weighted towards Airbus planes, despite the country’s airlines as a whole on average
having a slight preference towards Boeing, but they still do operate a significant number
of Boeing planes. While Boeing is not, of course, a state-owned
company, they are the US’ largest exporter and a major American employer and therefore
the US government and Department of Commerce works hard to prop them up. As the largest international market for Boeing,
China has the keys to either help or hurt America’s economy through how many planes
it decides to order. In the height of the US-China trade war, in
March, 2019, Chinese President Xi Jinping announced a massive $35 billion order of 300
Airbus aircraft by China’s state-owned aircraft leasing company. While you can never know for sure, this certainly
was viewed as a move at least partially intended to send a message to the US. Meanwhile, since the beginning of the trade-war,
there has been a noticeable lack of significant Boeing aircraft orders by Chinese airlines. These, however, are most all fairly short-term
threats. The trade-war will pass, the 737 MAX will
take the skies again, but what is perhaps Boeing’s largest problem is still to come. Their largest threat is that China is building
their very own plane. It’s being built by the Commercial Aircraft
Corporation of China or COMAC. Now, to recap, in the commercial jet aircraft
manufacturing space, there’s of course Boeing and Airbus, then there’s Embraer, which
is in a joint venture with Boeing, and Bombardier, who’s flagship C-series program was bought
by Airbus. Therefore, Boeing and Airbus control an enormous
majority of the industry. Aside from that, the only major unaligned
aircraft series is the Bombardier CRJ regional jet who’s manufacturing rights are in the
process of being bought by Mitsubishi. There’s then the Russian United Aircraft
Corporation producing a small number of Ilyushin, Tupolev, and Sukhoi jets and an even smaller
number of commercial jets produced the the Ukrainian Antonov company. These Russian and Ukrainian aircraft tend
to mostly be bought and operated by Russian and Ukrainian airlines, so, in terms of global
aircraft competition against Boeing and Airbus there really is none. It is the textbook duopoly. COMAC, however, could break that. It may surprise some to hear that there are
already COMAC aircraft flying in China’s skies—the ARJ21. This small, 78 passenger jet was COMAC’s
first significant foray into commercial aircraft manufacturing and it has been, to put it bluntly,
a disaster. When it was first announced in 2002, the aircraft
was supposed to take the skies in 2005. In reality, though, the first prototype wasn’t
completed until 2007, the first test-flight didn’t happen until 2008, and then after
delay upon delay upon delay, the first commercial flight didn’t happen until 2016. Since then, the issues have not let up. The aircraft was plagued with reliability
and capability issues and, to date, only fourteen are in commercial service. Now, it would be quite reasonable to question
why this aircraft could threaten Boeing especially considering that Boeing doesn’t even develop
an aircraft in a similar size to the ARJ21. The answer is that it doesn’t. The aircraft that should make Boeing nervous
is this—the Comac C919. Worth noting is that Boeing is actually in
a joint venture with COMAC for its final-delivery plant in Zhoushan, but that certainly doesn’t
stop the companies from competing. Just by looking at this plane you can tell
it’s built to compete directly with Airbus’ a320 and Boeing’s 737. It’s designed to carry pretty much the exact
same number of passengers and it even uses the same engines at the a320neo and 737 MAX,
but let’s be clear, the c919 is not the a320 or 737. It’s a brand new aircraft by a brand-new
aircraft manufacturer and it’s abnormal for even Airbus or Boeing’s new aircraft
introductions to go smoothly. Designing aircraft is difficult. The c919 is still in its testing phase so
its true performance and reliability statistics are not yet verifiably known, however, in
all honesty, the success of this plane has less to do with its actual capability than
probably any other plane in the world. The success of this plane has to do with whether
the Chinese government decides it will be successful. Of China’s eight largest airlines, just
one, Hainan Airlines, is not government owned. China’s government holds the keys to hundreds
or thousands of aircraft orders—why would it order from anyone but itself? Unsurprisingly, quite a few of the C919’s
orders to date have come from Chinese state-owned airlines and aircraft leasing companies. Its only non-Chinese order came from GE’s
aircraft leasing division—possibly as a vote of confidence considering the C919 uses
GE engines. The real test on whether the C919 is actually
a good plane will come once it enters commercial service, its reliability and capability is
exhibited to the world, and foreign airlines consider whether they want to order it. With China’s expertise in low-cost, high-tech
manufacturing, it could possibly prove a low-cost alternative to the a320 or 737 which has had
some airlines intrigued—most visibly Ryanair who’s CEO said he would be seriously interested
in the aircraft if a 200 seat variant was developed. China also has increasing geopolitical power,
especially in pockets of Africa which also have fast developing aviation markets, and
this could translate to a number of politically aligned countries choosing to buy and operate
COMAC planes. Overall, the real challenge to Boeing is the
opportunity. If they miss the opportunity to become a dominant
player in the world’s future largest aviation market, they could have trouble maintaining
their position as the world’s largest aircraft manufacturer. Being number one means that staying number
one is the expectation, not the goal, and so the Chinese market, while it is an opportunity,
is also a requirement. Now, in a similar vein, anyone who’s been
number one in anything knows that staying there requires continuous improvement. That means that no matter if you’re at the
beginning of your career or if you’re already at the top, you know that you should be constantly
improving yourself. Part of the way that I make sure I’m always
doing that is by using Skillshare. Their courses are a great way to quickly and
simply learn new skills. For example, for anyone that has to do presentations,
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100 Replies to “Boeing’s China Problem

  1. BOEING AND AIRBUS HAVE TAUGHT THE CHINESE TO BUILD AIRCRAFT! WHEN CHINA IS DONE LEARNING TO BUILD JETS, THEY WILL NATIONALIZE THE PLANTS!!! DUHH!!!

  2. No one is going to buy a fucking Chinese plane, are you serious?? China probably wouldn't even buy them lets be real 😂😂😂

  3. There the biggest point is the Comac. It will be the main airplane to all of those companies who are partly owned by Chinese government or financed by Chinese state owned banks and those companies which are state owned and where China has big enough influence and then those companies who are just looking the cheapest price. It does mean that Comac planes will be the main plane at all Chinese companies and well as several Asian and African companies as well as Ryanair and similar low cost companies. Those will be bigger market than the rest of the companies so after 10-15 years Comac will be the biggest airplane manufacturer, unfortunately.

  4. I'm curious what Boeing is doing to really fix the problem with the 737 Max. Seems they really should either go back to the original engines designed for the 737, or redesign the 737 to not need the MCAS (the device that caused the crashes). Be even more maddening then the self certification Boeing was allowed to certify their own planes, not sure what has been to address that problem.

  5. :15 odd way to say half a billion passengers, but then put the number of 500,000,000 (500 million) yes they could be considered equals but for those who aren't native english speakers it's confusing to state one number and then display a different wording visually… Although equivalent they aren't the same. 1/2 billion would have been better in the graphic or verbally state 500 million. Also, Anatov was defect in 2017. But if the Comac is produced the way many of low cost items are produced in China. IE: Using substandard materials, not maintaining quality control standards, etc. If you look at a category on Amazon for a product. The low cost versions made in China will often show shorted wiring, cracked casing, etc, etc. So If Comac is to be low cost jet, Ryanair may be expecting more than they receive.

  6. Good content about the China aircraft market. I will not fly on a COMAIR aircraft. There is now and never has been quality manufacturing result in a Communist political system.

  7. 5:23 ONLY IN USA SAFETY AND LOGIC IS CONSIDERED FLEXING THEIR MUSCLE TO HAVE THE UPPER HAND IN BUSINESS…. EVEN IF EVERYTHING IS CONNECTED TO THAT, THEY STILL HAVE TO PLAY IT SAFE AND NOT KILL PEOPLE WITH THE RUSHED BOEING MACHINE

  8. In the long run, which is the game the CCP is playing, it doesnt matter. China already produces its own scooters and cars. Commercial aircraft are soon on the horizon. So it doesnt matter what Boeing or Airbus do, the CCP will replace them with domestically made aircraft as soon as it can. And just like with all its other markets, outsiders will be pushed out (largely) and domestically produced goods will be given an unfair advantage.

    Edit: Oh, 7:44 this video mentions that.

  9. China are the biggest Boeing costumers and yet, your STUPID president are threatening china by cutting American services such as Android, what a stupid move

  10. Why is China buying so many planes? Well capital chases assets, and right now China has a capitalization bubble. What will China do to those planes? Probably sell most of them at a loss in 5 years. China is fast becoming japan 1984 2.0

  11. Funny how when china actually makes "their own" plane, it's just a ripoff off a european plane. They really have zero innovative capabilities what-so-ever. I don't get why western countries still keep pouring money into china, when they'll just become our greatest competitor in a 100 years or so

  12. You can not deal with China using free market principles. You have to look at any large company as being the Chinese government. Tariffs are a very important tool to use. Never allow Chinese products to be sold in the US at a lower cost then what products manufactured in the US can be purchased at.

  13. COMAC was charged with copying the A320 and 737 without the benefit of experience with design and manufacturing regulations or the tribal knowledge of Boeing or Airbus. Historically Chinese corporations seem to expect regulations to adapt to their needs which fails to work in a world regulated market such as aviation. This will require a massive shift in thinking at COMAC and a willingness to adapt to the realities of the rest of the world. It is a significant accomplishment that they have produced a prototype C919 that has even flown but this falls decades short of Chinas stated goal to mass produce an FAA or EASA Type Certificated aircraft for the world market. Unfortunately for Chinas world stage ambitions the C919 may be be delayed long enough to be out of date. Uncertified outside of China the C919 if produced at all will exist only in small numbers. The odds are China will eventually get commercial aircraft manufacturing right but the rest of the world sees the obvious need for huge cultural and intellectual evolution. These changes may require generations to accomplish and cannot just be willed into place by government decree.

  14. Look at that Whore, Macron. What a perfect prostitute he is, smiling, while he has that Chinese cock in his mouth. Making eye contact while he sucks, and all. So good.What does he charge for an hour?

  15. i got bored.. opened up porn.. jerked off… allt he while this guys blabbering in the back ground… looked at my facebook.. then realized I had this playing in the background the whole time for the past 9 minutes and completely forget about fucking boeing or china.

  16. The “cheap” always becomes expensive. Thanks to the greed of corporations; America has decimated its manufacturing, transferred its wealth & handed over their blueprints…all whilst crushing the middle class.
    They were outplayed. SMH

  17. Chinese will dump boeing due to the National security risk it poses to non-US nations as soon as their capabilities are in Sync………Boeing is too involved in Arms manufacturing not to be involved in spying and Info. Extracting operations…….After all no one company in US has the Power to regulates itself unless involved in Covert ops………….The relationship of Boeing and the Defense dept. is too close and highly risky for any major Nation not to pay attention to………..Chinese might be Friendly and Diplomatic but would not take them for Naivity………Selah

  18. All manufacturing must be done in US; otherwise, the CCP's CAAC will sabotage production and ground planes then sue and cripple Boeing meanwhile the CCP steals the IP and makes these counterfeit planes and shoddy parts themselves.
    The world can't afford an out of control overpopulated country like China to continue profiting from polluting, stealing, lying, infiltrating civilized democratized god-fearing nations like US.

  19. To be frank, i will never choice Boeing during my left life. You are evil and not honest. You made fault and pretend nothing happened. What the fuck!

  20. If you look at the broader picture, this is part of transition and shifting of centre of gravity from West to the East and hence the ensuing struggle & readjustment on the world level.

  21. Mainstream education is not an actual representative of a true understanding of reality, it is the biggest mind control church ever, with a very sophisticated compartmentalised traumatised fractured psychological fear based control system and that doesn't need you're belief, try telling the government that you promise not to break any laws and you no longer need to pay tax and you could ask how can they tell you what to do if they work for you, with an educated and entertained understanding of freedom you now in the land of make believe, it is as they say time to wake up, now don't think I'm telling you this because of compassion most of you are to childish to care with poorly maintained minds that will now act in according to you're programming brainwashing education call it what you're comfortable with

  22. mightbe it sounds bad that boeing has to lower price, but same time it will be cheaper thna airbus

    then, if same price makes 10 boeing plane versus 6-7 airbus plane then boeing can slice way bigger from the chinese market

  23. 帝国主义亡我之心不死,所有一切都是围绕颜色革命,颠覆政权为目的,关心你的民主?自由,完全是胡扯!

  24. Nah, Chinese made aircrafts are the worst. They're noisy, unreliable and unsafe. Similarly, other countries like Russia have built their own planes, but they have gone nowhere. Despite some accidents here and there, Boeing aircrafts are still the safest on the planet. According to the latest reports, the average person living in the United States has a 1 in 102 chance of dying in a car crash, compared to a 1 in 205,552 chance of dying as a passenger on an airplane.

  25. Beware the chinaman ,they want to eat every living thing on our planet and every dead thing also.Serpents disguised as worms.

  26. China should not buy anything from the US at all the way trump treated Huawei and China companies. The END trump will be a BIG LOSER. Time will tell.

  27. China's Boeing problem. With a huge fleet of Boeing aircraft, China faces the prospect that if the split between the United States and China becomes heated and rancorous enough, the US government could cut China off from spare parts, service updates, and everything else needed from the manufacturer to sustain after sales support. China's fleet of Boeing aircraft could become a total loss.

  28. I fly 737max once before, left wing starts to over shake after 30 minutes took off, literally worst plane i tried, i miss my DA42 after that

  29. USA 🇺🇸 needs to fire 🔥 trump today,otherwise the United States 🇺🇸 will lose it’s ground in world’s economies. Trump is the distraction of America

  30. Just because China grounded the 737 first doesn't lend to their credibility. I will NEVER get on a Chinese produced plain.

  31. Mmm…Nah. I'm not overly concerned- Yet. Will keep an eye on the new effort at Chinese aircraft production, though. Give them another 15 years, and call me back.

  32. the number will drop in the future since china had started developing their own plane already check out C919, economic war will eventually end just not in this century.

  33. Every time I see a video about People saying things about China’s issue with the outside world, it tells me they don’t know China’s main priority.

    China’s number 1 priority are it’s people. That’s why they spend so much money building up cities. That’s why they always insists on companies bringing jobs into China, when you have 2billion mouths to feed, this is the only way.

    Also, it appeases the people, so they do not go on strikes, making the country unproductive. Which affects other normal people, and when the mob grows bigger, the communist party falls. That’s the real China problem.

    You wanna be really cool friends with a Xi Jin Ping?
    Create a lot of jobs in China. He’ll be your number one Friend if you can bring in billions of jobs for China.

  34. Let the computer fly the plane, what could go wrong? Until full command of the aircraft is returned to the flightcrew I'm staying on the ground.

  35. This information is completely wrong on video I recommend for you looking where get this Source of information. It was known Chinese’s airlines have large number of Boeing Fleets because cargo and trade exchange.

  36. Amigo, In your highlighting of the China map… you left TAIWAN out of it. How would you feel if the USA map was left out without Texas? 🙂 Please CORRECT your mistake.

  37. If China does not realize they must alter their trade practices their economy will collapse and the travelers will decline sharply.

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