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Big Boeing deal announced in China isn't much of a big deal

Dominic Gates, The Seattle Times on

Published in Business News

Yet the Airbus order book for the year to date includes only 20 firm orders for A350s from China, and those were ordered by China Southern last April.

The A320 order book contains just one significant Chinese firm order for the year, one for 32 planes by Cathay Pacific.

Behind the stagecraft is this reality: China has been steadily buying Boeing jets and will continue to do so. Already, one third of the all the 737s built in Renton, Wash., go to airlines in China.

But China, as a centrally controlled economy, buys jets in a different way than other nations.

First, the Chinese government approves a large purchase from either Airbus or Boeing -- it has a long-standing policy of buying roughly equal numbers from both manufacturers -- through some centralized entity such as the state-owned China Aviation Supplies Holding company, based on its budget for the latest five-year plan.

That is not a firm order. No money is paid until the second phase, which is when the various Chinese airlines make separate pitches to the government for a piece of the order.

Once an airline gets the go-ahead from the government, funds will be released and the airline will pay the necessary deposit. Only then will Airbus or Boeing book that transaction as a firm order -- though very often it will be booked as an "unidentified" customer.

With this process of multiple approval stages, China orders take a very long time and are often difficult to track.

And Boeing did have some real order news on Thursday, including a significant order from China that had nothing to do with the announcement in Beijing.

Among 69 new firm orders Boeing booked on Thursday was one from China Development Bank for 48 single-aisle 737s and eight widebody 787 Dreamliners.

Boeing said that is a new order that was not included in the 300 jets Trump touted.

According to market pricing data from aircraft valuation firm Avitas, that order is worth about $3.6 billion after standard industry discounts.

Also included among those fresh firm orders on Boeing's order website Thursday were the two 747s bought by the Air Force to be converted into Air Force One aircraft for the president.

Boeing is soaring high above Airbus in sales this year, with net orders for 605 aircraft, compared with 288 for its European rival.

(c)2017 The Seattle Times

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