{"id":62327,"date":"2018-04-05T12:19:35","date_gmt":"2018-04-05T12:19:35","guid":{"rendered":"https:\/\/www.biphoo.com\/bipnews\/?p=62327"},"modified":"2018-04-05T12:19:35","modified_gmt":"2018-04-05T12:19:35","slug":"jet-weight-puzzle-determine-china-tariff-impact-boeing","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/business\/jet-weight-puzzle-determine-china-tariff-impact-boeing.html","title":{"rendered":"Jet weight puzzle to determine China tariff impact on Boeing"},"content":{"rendered":"

Jet weight puzzle to determine China tariff impact on Boeing<\/span><\/strong><\/h2>\n

China on Wednesday announced plans to place a 25 percent tariff on certain U.S. aircraft, in a move expected to affect some older Boeing Co (BA.N) narrowbody models, according to documents from China\u2019s Ministry of Commerce and the U.S. manufacturer.<\/span><\/p>\n

But although several analysts said China had spared the newer 737 MAX – key to future Boeing profits – the impact remained uncertain because of a lack of detail in the announcement and the fact that not all airplane characteristics are published.<\/span><\/p>\n

Boeing shares fell as much as 6 percent after China hit back at U.S. tariffs with the announcement of duties on key U.S. imports including soybeans, cars, beef and chemicals, as well as planes.<\/span><\/p>\n

These include aircraft with an \u201cempty weight\u201d of between 15,000 kg and 45,000 kg, or 15 to 45 tonnes.<\/span><\/p>\n

Depending on how \u201cempty weight\u201d is defined, this leaves a question mark over the fate of Boeing\u2019s new big-selling 737 MAX 8 jet – though the larger MAX 9 and MAX 10 could be spared.<\/span><\/p>\n

The stakes are high. The United States exported $15 billion of aircraft to China in 2016, ranking equally with agricultural products like soybeans as the biggest category of goods.<\/span><\/p>\n

Several definitions of \u201cempty weight\u201d are used in the aircraft industry and the ministry document gave no explanation.<\/span><\/p>\n

Two industry experts said the rules most likely refer to the \u201cmanufacturer\u2019s empty weight,\u201d or the core aircraft structure.<\/span><\/p>\n

But manufacturers are usually shy about publishing this number because of its commercial sensitivity, while they do give estimates for the slightly higher \u201coperating empty weight,\u201d which includes airline crew and some equipment, but not fuel.<\/span><\/p>\n

Yet even this number can vary according to an airline\u2019s specific requirements, so it is seen as a guideline.<\/span><\/p>\n

Whatever category is used, the range appears comfortably to include the current-generation 737 narrowbody aircraft, which is in the midst of being replaced by the newer 737 MAX.<\/span><\/p>\n

Boeing documents available online list the \u201coperating empty weight\u201d (OEW) of the 737-700, 737-800 and 737-900 well within the tariff zone at 37.6 to 42.9 tonnes.<\/span><\/p>\n

The \u201cmanufacturer\u2019s empty weight\u201d (MEW) would typically be about 1-1.5 tonnes lower, two airplane appraisal experts said.<\/span><\/p>\n

In contrast, the newer 737 MAX 8 is heavier than its predecessor, with an operating empty weight of 45,070 kg, according to a Boeing document published in August 2017.<\/span><\/p>\n

Depending on how rules are applied, this leaves it hovering close to the tariff border line and potentially still exposed to sanctions if the more conservative \u201cmanufacturer\u201d scale is used.<\/span><\/p>\n

\u201cI would expect a non-variable weight (MEW) to be used as the benchmark, as OEW will vary from operator to operator,\u201d said Stuart Hatcher, chief operating officer of UK-based advisory firm IBA, adding this would pull the jet below 45 tonnes.<\/span><\/p>\n

Even if the more generous OEW weight format were used, not all 737 MAX 8s might escape as some use lighter layouts. \u201cA 70kg drop is pretty easy once you get into the realms of low-cost carriers or standard single-class operations,\u201d Hatcher added.<\/span><\/p>\n

Boeing said in a statement that while the United States and China have both outlined positions that could harm the global aerospace industry, nothing drastic has happened yet.<\/span><\/p>\n

\u201cWe will continue in our own efforts to proactively engage both governments and build on the recent assurances by U.S. and Chinese leaders that productive talks are ongoing,\u201d it said.<\/span><\/p>\n

Chinese airlines have been on a buying spree from Boeing and rival Airbus (AIR.PA) as air travel grows.<\/span><\/p>\n

Boeing and China\u2019s Commercial Aircraft Corp of China (COMAC) are expected to open a 737 completion center in the coastal city of Zhoushan to install interiors and paint liveries this year.<\/span><\/p>\n

The bulk of published 737 orders from Chinese that have not yet been delivered are for the newer MAX version.<\/span><\/p>\n

However, China Southern Airlines (600029.SS), Ruili Airlines and Okay Airways each have two 737-800s on order and Xiamen Airlines has four more, according to the Boeing order book.<\/span><\/p>\n

Asked if the airline\u2019s plane buying plans could shift away from Boeing, China Eastern Airlines Corp (600115.SS) Chief Executive Ma Xulun said on Wednesday \u201cit\u2019s too early to say, we will keep an eye on the situation of the China-U.S. trade war.\u201d<\/span><\/p>\n

Apart from some Boeing jets, the Gulfstream G650, a large corporate jet manufactured by General Dynamics Corp (GD.N), also falls into the weight range targeted for tariffs.<\/span><\/p>\n

Reporting by Jamie Freed in SINGAPORE and Brenda Goh in SHANGHAI; additional reporting by Tim Hepher in PARIS, Alwyn Scott in NEW YORK; Writing by Jamie Freed and Tim Hepher; Editing by Mark Potter, Susan Fenton and Tom Brown<\/span><\/span><\/p>\n

Source:-https:\/\/www.reuters.com\/article\/us-usa-trade-china-boeing-analysis\/jet-weight-puzzle-to-determine-china-tariff-impact-on-boeing-idUSKCN1HB22B<\/span><\/p>\n

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