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China Places Order for 300 Boeing Jets

In a brief statement published Tuesday, the official Chinese news agency Xinhua said that a “group of Chinese companies” has signed an agreement with Boeing Co. (NYSE: BA) to buy 300 Boeing aircraft. The news agency also reported that the country’s Commercial Aircraft Corporation of China Ltd, known as Comac, signed a “cooperative document with Boeing to build a 737 completion center in China.”

Neither event was exactly unexpected, although the order for 300 Boeing planes may be larger than anticipated. Xinhua did not offer any details about the order, but it is likely to include both single-aisle (737) and dual-aisle (777, 787) planes with a majority of the orders written for the 737.

For its part, as of 7 a.m. ET Wednesday morning, Boeing has not posted any information regarding the order or the new completion center. China’s President, Xi Jinping, arrived in Seattle Tuesday and is scheduled to visit the Boeing plant in Everett, Wash., Wednesday.

The completion center announcement was also expected if not exactly anticipated, at least by Boeing’s labor unions. The fact is, though, that Boeing really had no choice. Since 2009 Airbus has operated a final assembly line near Beijing for its A320 planes and recently agreed to build a completion center for its A330. China promptly ordered 45 of the company’s A330 passenger jets after dithering for two years.

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Boeing may be trying to pull in the delivery date for its new 737 MAX planes, now scheduled for delivery in 2018, into 2017. According to a report at Leeham News, Boeing may face a production gap for its current version of the 737, and a significant order from China would help the firm plug that gap. The same is true of production of Boeing’s current version of the 777, and that leads to speculation that some of those planes are also included in the new Chinese order.

Boeing’s main union in Washington, the International Association of Machinists & Aerospace Workers (IAM), Local 751, is wary of a new completion plant in China. In a statement on its website the local said:

In a previous meeting with Renton’s 737 leadership we saw a brief presentation outlining Boeing’s perceived market conditions regarding sales of single aisle aircraft and the company’s desire to collaborate with China. We have asked the Company for details of what is intended with “collaboration” and have not received ANY information on “collaboration” or confirming or disputing the media reports. While we don’t know specifics of any such proposal, ANY shift of aerospace jobs from our bargaining unit or Washington State causes grave concern.

Airbus’s China completion center — and its planned center in Mobile, Alabama — is said to create three jobs in the home market for every job at the offshore center. That may be true, but those jobs are not likely to be in Boeing’s unionized plants, but rather in the company’s other U.S.-based suppliers. It is not difficult to see why the IAM is wary of plan for a Chinese plant.

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Boeing’s reported partner in a completion center, China’s Comac, is building its first single-aisle passenger jet, the C919, which is already about two years behind scheduled. A first test flight set for late this year has been pushed into next year and first deliveries, originally set for 2018, could be delayed until 2020. The C919 eventually will compete with both the Airbus A320 and the 737 for customers.

Reuters reported Wednesday morning that China’s ICBC Financial Leasing Co. has signed up for 30 of Boeing’s current 737-800 single-aisle planes. Later in the day, we expect to have more details regarding China’s order for Boeing planes.

By Paul Ausick