Crucial Boeing tanker 1st flight follows China leader’s visit

EVERETT — It’s a big week for the Boeing Co., which will be on display for two of its biggest customers: China and the U.S. Air Force.

Both are key cash sources for Boeing in coming years. Thousands of jobs in the area depend on the Chicago-based company keeping both customers happy.

China Pres. Xi Jinping will visit Boeing’s Everett plant Wednesday during a three-day stopover in the area on his way to a state visit in Washington, D.C. The day after his Boeing 747 takes off from Paine Field for the East Coast, Boeing’s new KC-46 aerial refueling tanker is slated to make its first flight, nine months behind schedule.

China is quickly becoming the world’s biggest market for jetliners. Boeing and its European rival, Airbus Group, compete fiercely for orders for the country’s burgeoning commercial air travel industry. China’s breakneck economic growth of the past 20 years has led to a middle class that is still getting bigger and is flying more.

Much has been made about recent missteps in China’s economy, such as the dramatic recent drop in the country’s Shanghai Stock Exchange.

“There’s been a slowing of growth, but there’s also been a restructuring,” said Randy Tinseth, vice president for marketing at Boeing Commercial Airplanes.

Beijing is putting more emphasis on the country’s consumer sectors, and somewhat less on real estate development and heavy industries.

Consumer growth “has helped bolster traffic” for Chinese airlines, he said. “There’s a bit of pent up demand in China, and, I think, this restructuring has helped us, as well.”

Boeing expects to see traffic grow by 6.6 percent a year during the next 20 years, faster than its projection of 5.6 percent annual economic growth. To keep up with demand, Chinese airlines will need 6,330 new airplanes, worth an estimated $950 billion at current list prices. Airplanes almost always sell for considerably less than list price.

While Chinese airlines tend to get the orders they want, the country’s leaders in Beijing still have to sign off on the purchases, said Richard Aboulafia, an analyst and vice president at the Fairfax, Virginia-based Teal Group, an aerospace consulting firm.

Chinese leaders “like to save up airplane orders and announce them during these visits,” he said.

Last year, during Xi’s three-day visit to France, Chinese businesses signed deals worth $25 billion with Airbus and other major manufacturers.

China is already a huge trade partner for Washington, which leads all other states in how much it exports to China, thanks to Boeing jets.

Last year, trade between the state and China was worth more than $29 billion.

This year a quarter of all Boeing airplane deliveries have gone to Chinese customers.

When Xi’s plane lands Tuesday at Paine Field, he will be the fourth consecutive Chinese leader to visit the region. In addition to his Boeing tour, he plans to visit Microsoft and tour a Tacoma high school.

Boeing might use the visit to announce plans to open a 737 finishing and delivery center in China.

The company is the biggest international buyer for China’s domestic aerospace industry, which aims to crack the Boeing-and-Airbus duopoly. COMAC is developing a single-aisle jet, the C919, to compete with the 737 and A320. It is also developing a regional jet, the ARJ21.

China-U.S. relations have many contentious issues, too, such as cyber attacks targeting American companies and apparently launched from China. Human rights issues remain a concern for Western leaders. And the country continues expanding reefs and islets in the South China Sea.

Xi has consolidated his power since taking over from his predecessor, Hu Jintao, in late 2012, to become the strongest Chinese leader since the 1980s.

After Xi takes off to see U.S. President Barack Obama and the United Nations, Boeing can focus on the first flight for the KC-46 Pegasus aerial-refueling tanker, which is scheduled for Friday.

Boeing has poured people and money into the airplane development program to keep it on track. The company has had to significantly cut the program’s flight test schedule.

Brig. Gen. Duke Richardson, who oversees the Air Force’s tanker program, said he is “cautiously confident” that Boeing can still deliver the first batch of tankers on time by August 2017.

The Air Force hired Boeing to develop the new tanker as a replacement to its 1950s-era KC-135 Stratotankers.

But design and supply- chain problems have delayed Boeing’s aggressive development and flight test schedule.

The Air Force’s top civilian and uniformed officials “are not happy with where we’re at on the schedule, and neither am I,” Richardson said.

There is no margin left for further delays, he said.

Boeing has already said it is covering about $1.26 billion in program cost overruns. The company aggressively bid the development contract, and is counting on making money once the plane is in production.

The tanker program is an important revenue source for Boeing’s defense division in the coming years. Boeing Defense, Space &Security’s backlog is about 10 percent the size of the company’s commercial order backlog.

The new tanker has performed well in ground tests, he said.

An interim airplane model, a 767-2C, has been doing sustained test flights since late May. The plane flew 94 flight hours in August, he said.

The program has solved all flutter issues that had existed on wing-mounted fueling pods on Boeing’s KC-767, a related model that the company sold to foreign militaries, he said.

That first test plane has finished with all tests the Air Force required and it has moved on to getting its airworthiness certification from the Federal Aviation Administration.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.

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