[Analytics] China’s belt and road trade strategy could determine the design of Boeing’s new 797 plane

Initiative could encourage a meeting of minds on requirements for new plane type, Boeing marketing chief says. US manufacturer sees potential for an aircraft that would make more routes viable between nations involved in the ‘Belt and Road Initiative’. Danny Lee specially for the South China Morning Post.

China’s belt and road global trade strategy could spur the world’s largest planemaker to design and build a new mid-sized aircraft within a decade to serve the growing air travel market between the country and its partners in the plan.

The new model could operate on medium-distance routes where large twin-aisle jets are too big and costly to fly and single-aisle planes too limited in their range, according to Boeing marketing chief Randy Tinseth.

The US manufacturer sees potential for an aircraft that would make more routes viable between nations involved in the “Belt and Road Initiative”. It is being dubbed the Boeing 797.

The company is currently grappling with intense scrutiny over two fatal crashes involving the upgraded version of its best-selling 737, which has been a cash cow for half a century. The firm will not make a decision on the 797 until next year.

The belt and road strategy is an ambitious plan devised by President Xi Jinping to coordinate trillions of dollars of infrastructure investment across the regions of Africa, Europe and Asia historically bound by the ancient Silk Road trading routes.

“China is a little bit unique in that it has misused a lot of wide-body planes,” Tinseth said on the sidelines of an aviation conference on the trade initiative. “A middle-of-the-market airplane would better allow them to optimise that process, so it’s an opportunity in China, no question.”

Cathay Pacific Airways, one of Asia’s biggest carriers and Hong Kong’s flagship airline, said at the conference that it saw a limited appetite for new flights along belt and road routes, but this was in part because it did not have the right aircraft to serve these markets. Boeing reckons it might have the 797 in the air by 2025 to fill that gap.

For both Boeing and arch-rival Airbus, China is a huge source of future demand for new plane orders. The country is tipped to be the world’s biggest aviation market by the middle of the next decade, and is expected to absorb 7,690 aircraft in the next 20 years.

“For a middle-of-the-market airplane, 40 per cent of the market in general is in Asia, and 40 per cent of the demand for a new mid-sized aircraft would be here as well. There is no mystery there,” Tinseth said.

Boeing has estimated it will deliver 42,730 new planes over the next 20 years, and 31,360 will fall in the medium-haul, single-aisle jet category.

The belt and road initiative could encourage a meeting of minds on requirements for a new plane type that Boeing could then start building, Tinseth added. “We have seen significant growth regionally but this is one of the opportunities that is helping generate growth.”

But Cathay Pacific chairman John Slosar sounded a cautionary note on the idea of new belt and road routes, saying airlines might need to join forces to open up new destinations. Some routes would only justify one or two flights a week, he said.

“The best thing would be if the airlines on both ends somehow worked collaboratively to feed people back and forth at either end of the routes.”

Slosar singled out Central Asia as the region attracting the most interest, but said it would be vital that governments there open up air traffic rights. He also emphasised that airlines could not be pushed to launch new routes if there was no business case.

“It’s got to be the airlines that figure out how to do it commercially, because certainly the belt and road is about doing things commercially, not on a subsidised basis,” he said.

Peter Huijbers, a former aircraft leasing executive and director of PH Aviation Asia, said the prospects for a new mid-sized aircraft were strong along the trade routes, but the model would arrive too late.

“I think the new mid-sized aircraft has good potential to do this but at a later stage,” Huijbers said. “I think for the Belt and Road Initiative, it is something that needs to happen today, tomorrow, and [the new plane] comes onto the market in 2025.”

Tinseth said Boeing’s timeline for the new aircraft was on track but it had not been officially marketed for sale.

“We’ve been working – and our plans have not changed – our focus is still an airplane that would enter service in the middle of the next decade,” he said.

In the short term there could be other opportunities for Boeing and Airbus to work with China as well as the country’s home-grown rival Comac. Tinseth said getting Comac involved in some level of co-production on Boeing’s mid-sized jet plans could open the door to more sales.

“But I would not be surprised if China says, ‘We have our own industry that can do a lot of good things, and we want to make sure this is no longer a two- but a three-aircraft playing field.”

Boeing last December opened a completion and delivery centre at Zhoushan in Zhejiang province, which is dedicated to the 737 MAX jet, the plane involved in the two recent crashes.

Tinseth said the firm was comfortable with its strategy but remained open to changes in its priorities. It has not secured a new plane order from China since November 2017, and aircraft sales have now become a political matter with the US-China trade disputes.

Last month Airbus was lifted by a substantial Chinese order for 300 planes worth €30 billion (US$33.66 billion) that was inked during Xi’s state visit to Europe.

The effects of the worldwide grounding of the MAX are likely to have spread to Zhoushan. China’s civil aviation regulator has revoked the airworthiness certification of the single-aisle jet. Boeing said on Friday it would reduce production of MAX jets by 20 per cent from mid-April to 42 planes a month.
When asked about how Boeing’s first and only overseas 737 plant was faring, Tinseth’s reply was coy. “We’re just in the early days,” he said.