Boeing braces for trade war headwinds in China

At Airshow China, the president of Boeing China said that the company was “confident” that dialogue would resume between US and Chinese negotiators. (AFP)
Updated 08 November 2018
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Boeing braces for trade war headwinds in China

  • While Boeing has so far escaped the rounds of tit-for-tat tariffs, analysts say it is at risk of being the next victim if the trade war escalates
  • Tariffs would bite deep for the Chicago-based company as China — the world’s second biggest aircraft market — represents one fifth of its global orders

ZHUHAI: At China’s biggest air show, a top Boeing executive voiced hope that the US and China would resume trade talks. He has reason to worry: The US aerospace giant could fly into turbulence in a protracted commercial conflict.
While Boeing has so far escaped the rounds of tit-for-tat tariffs, analysts say it is at risk of being the next victim if the trade war escalates, which would benefit its European rival Airbus.
Tariffs would bite deep for the Chicago-based company as China — the world’s second biggest aircraft market — represents one fifth of its global orders.
At Airshow China in the southern city of Zhuhai, the president of Boeing China, John Bruns, said that the company was “confident” that dialogue will resume between US and Chinese negotiators.
“A healthy airspace industry is in the best interests of both countries,” Bruns said at a news conference on Tuesday on the sidelines of the exhibition, where companies are showing off their latest planes, helicopters and drones this week.
While Boeing’s large planes have avoided tariffs, China has other ways to hurt the company, just as it battles Airbus for bigger shares of the massive market.
“The retaliation would mainly be in the form of canceled orders with a redistribution to Airbus, perhaps as much as 30-40 percent of the existing order book,” said Vinay Bhaskara, a senior business analyst for Airways Magazine.
“At the current moment, I give perhaps a 25 percent chance of this scenario where China cancels Boeing orders wholesale,” Bhaskara told AFP.
The trade war comes at a particularly awkward time for Boeing, which announced last year it had won a major contract worth about $38 billion to sell 300 aircraft to China.

 

In a worrisome signal, China’s Xiamen Airlines — a company that has bought exclusively from Boeing for three decades — is in talks with Airbus, according to Bloomberg News.
“This could be very good news for Airbus. It might just allow them to get to their rumored goal of 70 single aisle (A320) jets per month,?” said Richard Aboulafia, an aviation industry analyst at US consultancy Teal Group.
China is expected to surpass the US as the world’s biggest aircraft market in the mid-2020s, according to the International Air Transport Association. Boeing delivered 202 aircraft in China last year, beating Airbus, which sold 176.
Despite his rival’s potential woes, the head of Airbus China, Xu Gang, was also worried by the prospects of more tariffs. “I think nobody will be the winner of this kind of trade war,” Xu said, adding that his company welcomes dialogue between the US and Chinese governments.
“The trade war damages the trade relationship, which also damages a lot of commercial expectations of many private companies, and this will cost a lot of employment” and hurt salaries of the middle-class. This, of course, will have a negative impact on the aviation growth.”
Airbus would not necessarily have much to celebrate if China dropped Boeing orders.
“Airbus’ order book is backlogged for several years, so it doesn’t stand to gain from any challenges which Boeing may face,” said John Strickland, aviation analyst and director of JLS Consulting in London.

FASTFACTS

China is expected to surpass the US as the world’s biggest aircraft market in the mid-2020s, according to the International Air Transport Association.


Abu Dhabi Commercial Bank picks Barclays to advise on merger

Updated 20 min 5 sec ago
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Abu Dhabi Commercial Bank picks Barclays to advise on merger

  • Potential merger involves ADCB, Union National Bank (UNB) and Al Hilal Bank
  • A merger of the trio could create an entity with around $113 billion in assets

ABU DHABI: Barclays has been appointed by Abu Dhabi Commercial Bank (ADCB) to advise on a potential merger plan involving Union National Bank (UNB) and Al Hilal Bank, banking sources told Reuters.
The merger, announced by the banks in September, is the latest consolidation among state-owned companies in the United Arab Emirates’ (UAE) capital.
ADCB, majority owned by the Abu Dhabi government and the second largest bank in the emirate after First Abu Dhabi Bank (FAB), declined to comment. Barclays also declined to comment.
If it goes ahead, a merger of the trio could create an entity with around $113 billion in assets, according to Refinitiv data, and the UAE’s third-biggest lender after FAB and Emirates NBD.
A separate source said two banks could be created out of the consolidation, with the conventional banking units of ADCB and UNB merging to create one lender.
Another could be formed through combining the Islamic banking units of ADCB and UNB, along with Al Hilal.
AlKhaleej newspaper reported the same arrangement was being considered last month, citing sources.
The tie-up was at an early stage, UAE Central Bank governor Mubarak Rashed Al-Mansoori told reporters last week on the sidelines of a conference, adding he expected more consolidation in the future.
FAB was created by last year’s merger between National Bank of Abu Dhabi and First Gulf Bank.
The emirate of Sharjah is weighing a merger between three of its banks — Bank of Sharjah, Invest Bank and United Arab Bank, Reuters reported in September, citing sources.