Airbus extends its lead over Boeing in China with plans for a second finish line

New York (CNN) Airbus on Thursday announced plans for a second final assembly line in China, the latest sign that it has a lock on the key aerospace market over rival Boeing.

The announcement came as part of a state visit by French President Emmanuel Macron to China. The signing of the agreement by Airbus CEO Guillaume Faury was witnessed by Chinese President Xi Jinping and by Macron.

It will add a new line to the final assembly facility that Airbus opened in Tianjin, China, in 2008, which has completed 600 A320 aircraft to date.

Airbus (EADSF) operates four assembly sites around the world, but it estimates China’s air traffic in particular will grow 5.3% annually over the next 20 years, significantly faster than the world average of 3.6%.

This will lead to a demand for 8,420 passenger and freighter aircraft between now and 2041, representing more than 20% of the world’s total demand for new aircraft, Airbus predicts.

Boeing (B.A) has similar forecasts for China’s aircraft demand.

Sourred trade relations

But worsening trade relations between the US and China have basically shut Boeing out of the most important market for aircraft. Thursday’s deal includes the sale of an additional 160 Airbus aircraft to China, where more than 2,100 are already in service.

Boeing has not reported an order for a commercial airliner from a Chinese airline since 2017, only for orders from Chinese aircraft leasing companies that can buy them on behalf of buyers outside China, or for cargo planes, a segment of the market that Boeing dominates.

And deliveries to Chinese customers from Boeing have plummeted. So far this year, it has delivered just one 777 freighter to China Air Cargo, and there were only 12 jets delivered in 2022: eight freighters and four to a leasing company.

In 2017, the year the Trump administration first imposed tariffs on US imports of Chinese goods, sparking a trade dispute, Boeing delivered 161 jets to China, and a few more the following year. But with the 737 Max grounding and the pandemic causing a sharp drop in demand for flights, Boeing’s deliveries to China plunged to 45 in 2019, and to 27 in plus three years since then.

Boeing’s best-selling plane, the 737 Max, a competitor to the A320 family that Airbus is finalizing in China, has struggled to re-enter the Chinese market after a 20-month grounding that began in March 2019 following two fatal crashes that killed a total of 346 people.

China was one of the last countries to allow the plane to fly in its airspace again, and even with that clearance, none of the plane’s Chinese customers have accepted deliveries of the 138 Boeing built for them during the crash that are still sitting in the planemaker’s inventory. Boeing has been forced to try to find other buyers for some of these planes at discounted prices.

The 737 Max has lost competition with the A320 family also outside China, but it is not the total shutout that Boeing is experiencing in China.

Boeing CEO Dave Calhoun has said that all Boeing can do is wait and hope that relations between the two countries improve so that it can resume significant sales and deliveries in China.

“My hope is that these two major geopolitical forces come together and support free trade again … so they can take more deliveries of aircraft,” Calhoun told investors in October.

“But it’s very difficult for me to find signals that things are going to change in China and move in our direction,” he added.

— Jake Kwon in Hong Kong contributed to this article.