Trade war threat adds to Boeing woes
New York (AFP)
Already in crisis mode over the grounding of its top-selling 737 MAX aircraft, Boeing now finds itself at risk of becoming collateral damage in the US-China trade dispute.
The editor of Communist party-owned Global Times newspaper said Monday that Boeing's order book could take a hit as Beijing parries Washington in the escalating trade fight.
"China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China," Global Times editor Hu Xijin wrote on his verified Twitter account.
Talk of a Boeing hit came just after Beijing announced it will increase tariffs on $60 billion worth of US goods starting June 1, in retaliation for the latest round of US tariff hikes.
A Boeing spokesman struck a reassuring note, telling AFP, "we're confident the US and China will continue trade discussions and come to an agreement that benefits both US and Chinese manufacturers and consumers."
But the company's share price fell 4.5 percent in afternoon trading to $338.74.
"Any significant reduction in orders would be bad for Boeing," said Scott Hamilton of aviation consultancy Leeham Company. "However, China would hurt itself, too."
He noted that China is a supplier to Boeing and Shanghai is home to a Boeing plane finishing center.
In 2018, Boeing reported $13.8 billion in revenues from China, equivalent to nearly 14 percent of overall company sales.
During the past five years, about one in every four Boeing commercial jets went to an operator in China, supporting tens of thousands Boeing jobs, according to the company.
"It would be impossible for Boeing to not be wrapped up in this giant mess," said Richard Aboulafia of the Teal Group, an aerospace consultancy.
"Jetliners are the US' biggest manufactured export, and it's hard to see any other large products China would buy to make the US happy," Aboulafia said. "To look at it the other way, it's hard to see what the Chinese would conspicuously not buy to signal their displeasure."
- Under pressure -
Boeing is already under pressure after two deadly plane crashes forced the global grounding of its top-selling 737 MAX planes.
It has been working on a software fix for the flight system and hoping for quick approval from regulators, but it is unclear if the planes will be back in the air before the end of the critical summer travel season.
As a result of the 737 MAX crisis, Boeing has suspended deliveries of the planes and slowed production, hitting company revenues and clouding its profit outlook.
CFRA Research analyst Jim Corridore characterized uncertainty the 737 MAX as a major question mark dogging shares, but rated the trade war threat as less significant.
"We note that Chinese airlines are growing so rapidly that they need to continue to order and take delivery of planes, and Airbus alone cannot accommodate this demand," he said in a note.
"We think China recognizes the positive impact on their own economy from its growing air travel business."
? 2019 AFP