China not taking up Boeing orders – the impact

Early this week, the news was abuzz with the news that China is refusing to take delivery of new aircraft from Boeing and is postponing its existing aircraft orders. While that might sound ominous and a win for Premier Xi, China has already planned a migration away from Boeing and, in the future, Airbus.

Let’s examine how Boeing’s relationship with China has changed in recent years. After the two 737 MAX 8 fatal crashes in late 2018 and early 2019, China was the first country to ground the airliner. It was also the last market to allow it back in service once the issues with the aircraft were resolved.  

While Chinese airlines continued to order Boeing aircraft, they did so at much lower rates than historically. The last order for a Boeing from China was in 2021. The subsequent quality problems in 2024 seemed to harden China’s skepticism about Boeing safety, with no further orders for the 737 MAX since.  

Today, per Boeing’s website, the undelivered firm order aircraft backlog with China stands at 130 aircraft. Boeing’s total undelivered aircraft backlog worldwide is 6,319 aircraft, which means China represents 2.05% of the total orders. The following table shows the backlog by customer and aircraft type.

The ratio for the most popular model, the 737 MAX, is similar—96 aircraft out of 4,775, or 2.01% of total worldwide orders. The statistics show that China has not been a major customer for Boeing aircraft for much of the last decade and is now unlikely to change that trend, given the trade war.

China fully recognizes that Boeing represents the most significant element in the US-China trade balance, and that cutting purchases from Boeing maintains a leverage point.  By effectively blocking the US’s largest exporter, a boycott of one company makes a huge difference in their trade balance.

China has been developing its aviation industry for some time, with a very slow ramp-up.  However, the COMAC C909 is not being sold internationally, and the C-919, which is about the same size as the A320 and 737 MAX 8, has generated more than 1,000 orders from the domestic Chinese airlines.

However, both these aircraft rely heavily on Western engines, avionics, and key components manufactured globally in the aerospace supply chain, including key components made in the United States. Export restrictions for specific key components could likely be the next step if the trade war escalates, as that would be disruptive to COMAC’s production ramp-up plans.

The Impact

Boeing’s direct impact of the trade war with China will be the loss of about 2% of its order book. Fortunately, that is insignificant in the short term. Because of the high demand for new aircraft and a seven-year backlog for new orders, it is relatively easy for Boeing (and Airbus) to reschedule deferred orders as other customers are ready to move up.  

Could the trade war have a deleterious impact on Boeing?  The answer is potentially yes if an economic recession results from the tariff policies and a global recession occurs.  The likelihood of such is currently forecast to be around 50/50.  In a recession, other airlines may not need as much lift and defer deliveries.  Large-scale deferrals and cancellations would impact Boeing and the entire global economy.

The Bottom Line

In the near term, if the trade war focuses on China and other tariffs are deferred, it could be relatively easy for the company to absorb the 2% of orders that it represents by shifting some of its skyline forward. Boeing has rescheduled many Chinese aircraft that have not been taken up to be delivered to carriers in India. The number of aircraft on firm order from China-based airlines could easily be absorbed by carriers looking for earlier deliveries in the near term.

We believe this will be the most likely scenario to result from an impasse between the two countries.  China will order Airbus or COMAC aircraft, with Boeing focusing on other Asian growth markets, e.g., India, that may overtake China’s economy by 2050.

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