The new US administration has publicly stated it plans a 10% across-the-board tariff on Chinese imports. China responded by noting nobody wins a trade war. No matter how this happens, there will be a mess to work through. A COMAC solution? Boeing is at ground zero for any trade spat between China and the USA. The talk about China being able to fall back on COMAC is unrealistic. The table below clearly illustrates the point. [caption id="attachment_88476" align="aligncenter" width="500"] AirInsight[/caption] The volume is shown throughout the entire life of these programs. Even during the recent strike, Boeing out-delivered COMAC. COMAC is not a solution now and not for a long time. Moreover, COMAC depends on the US supply chain for many crucial inputs on the C919, the primary aircraft China depends on to reduce domestic airlines' need for Airbus and Boeing aircraft. In short, Chinese airlines need the aircraft they have ordered from Western OEMs. An Airbus solution? Airbus' Tianjin FAL helps Airbus and China through any US trade war, except for US parts—especially engines. This means the Tianjin facility is not immune to impact. In short, Airbus will not be able to offset any US-China trade spat. The FAL can keep manufacturing if it has the parts it needs. Once that supply is done, new part supplies likely come with Chinese tariffs on US-sourced goods. Boeing and China options? Since emotion is a significant variable impacting politics, what can Boeing and its Chinese customers do now? Job #1 must deliver the parked aircraft within the next 51 days. Let's go over the numbers. [caption id="attachment_88478" align="aligncenter" width="580"] AirInsight[/caption] The table lists our current estimate of Boeing's single-aisle inventory by year produced. Focusing on the MAX 8s, notice how many have been parked since 2019. The number decreased as Boeing sold several to Air India Express and Akasa. Of the 75 listed, a significant number are for China. [caption id="attachment_88479" align="aligncenter" width="580"] AirInsight[/caption] By our estimate, 54 (or 72%) of the 75 MAX 8s in inventory are destined for China. To reduce this inventory, Boeing must deliver at least one per day before January 20, 2025. Of the airlines listed, it's clear where Boeing needs to focus. The "odd lots" of fewer than two can possibly be sold to Indian airlines. Indian airlines are as desperate as Chinese airlines to secure deliveries. This need for new deliveries favors Boeing. The threat of Trump's tariffs only spurs the decision-making process among Chinese airlines. Or it should. It is unclear where the CAAC policy is to accelerate these deliveries, and they have a big say in fleet decisions. In truth, CAAC should facilitate faster deliveries. This would help Chinese airlines, and that should be their priority. They are helping the Chinese economy more than they are assisting Boeing. That is the rational take from a Western viewpoint. How the Chinese see it from their rational view is unclear. A Trump win was unexpected, as evidenced by the instant recalibration worldwide. Nations had to switch policy gears overnight. Trump's selection of people to work in the new administration is causing heartburn. The UK is a prime example. Britain's Labor Party's decision to send 100 volunteers to help Kamala Harris and the UK's Foreign Secretary David Lammy's unfortunate language will likely lead to recalibration. Who has an advantage? Whereas Boeing has the Indian option, China does not have an alternative. This is why we anticipate China will find creative ways to accelerate MAX deliveries. The need is obvious, and time is short. Boeing has the advantage, which is a rare moment for the company. Moreover, Boeing can expect a Trump administration to be supportive based on its "America First" approach. If this happens as expected, Boeing, China, and the Trump administration would be best served by letting it all happen quietly.
