Business

Boeing’s China problem worsens as Beijing punishes top executive over arms sales to Taiwan

China has sanctioned Boeing’s top defense executive just as the longstanding relationship between the top US plane maker and the world’s largest aviation market appears to be fractured.

Sanctions were announced on Friday against Ted Colbert, CEO of Boeing Defense, Space and Security, and Gregory Hayes, President and CEO of Raytheon Technologies, in retaliation for Boeing and Raytheon’s $1.09 billion sale of weapons to Taiwan. As part of the purchase, Taiwan purchased Boeing’s Harpoon rocket worth $355 million and Raytheon’s Sidewinder missile worth $85 million.

The US government announced the arms sales last week and said they were necessary for Taiwan to “maintain adequate self-defence” amid increased military pressure from Beijing.

Beijing explained the reason for the sanctions on Friday.

“China firmly opposes and strongly condemns the sale,” Mao Ning, a spokesman for China’s foreign ministry, said at a news conference. “The arms sale seriously undermines China’s sovereignty and security interests, and seriously damages China-U.S. relations and peace and stability in the Taiwan Strait.”

The Boeing Company is the parent company of both Boeing Defense, Space and Security, a defense contracting unit, and Boeing Commercial Airplanes, the division that manufactures passenger aircraft.

Boeing did not respond Luckasked for comment on the sanctions and their impact on their business in China.

Selling airplanes

Boeing has a 50-year history of selling planes in China, and Boeing’s jets make up about half of China’s passenger fleet. In 2018, China accounted for 22% of Boeing’s aircraft sales, Boeing’s second-largest market after the US, accounting for 29% of its revenue. But that close relationship has become strained.

China was the first country to ground Boeing’s best-selling 733-MAX in 2019, when a faulty design in the model contributed to two crashes. It was also one of the last countries to clear the plane in December last year, and the Civil Aviation Administration of China, the country’s aircraft regulator, has yet to let Chinese airlines fly. New aircraft delivery country.

China has “lost confidence” in Boeing and its B737 Max jets due to strained US-China relations and 737-MAX crashes, state newspaper Global Times written in July.

Meanwhile, Boeing is said to have built a backlog of 120 737-MAX planes for the Chinese market since China removed the model from the skies last December. But Boeing appears to be giving up on being able to send them to China anytime soon, announcing last week that it is reselling some of those planes to other countries amid China’s slowdown.

“We delayed decisions on those planes for a long time [but] We can’t delay that decision forever,” said Chief Financial Officer Brian West of The Boeing Company recently spoke at a conference organized by Morgan Stanley. “So we’re going to start remarketing some of those planes. On the other hand, they are intended for our Chinese customers. “

Boeing’s main competitor AirbusMeanwhile, in July, it was announced that China’s top three airlines had ordered 292 new A320 aircraft for $37 billion, showing China’s preference for the A320 over the 737 -MAX by Boeing. China’s state-owned COMAC is also expected to begin deliveries of its long-awaited C919 jet soon, which will further shrink Boeing’s market in China.

In July, Boeing lamented that years of rising US-China tensions, the trade war and mounting pressure on Taiwan have hurt the plane giant’s business in the country. .

“As a leading U.S. exporter with a 50-year relationship with the Chinese aviation industry, it is disappointing that geopolitical differences continue to limit aircraft exports,” a Boeing spokesperson said. American flight”. said in july.

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