I spent most of last week on the beach accompanied by a stack of paperbacks.
They were typical summer fare, light fiction and whodunits. But the summer’s best aerospace mystery was waiting for me when I got back from vacation.
Let’s call it “The Puzzling Case of the Ten Missing Dreamliners.”
Last week, China’s semi-official news agencies announced the happy news that five Chinese airlines were poised to sign contracts to purchase 50 787s from the Boeing Co. in a deal with a nominal list price of $6 billion.
That’s great news, or would be if it weren’t for the fact that in January, the Chinese government agency that coordinates airliner purchases had agreed in principle to a $7.2 billion deal to buy 60 Boeing 787s on behalf of six airlines.
That deal was a landmark, the biggest single Dreamliner sale Boeing has inked so far. It was so significant that Boeing held off on renaming its new plane – from 7E7 to 787 – so it would coincide with the China order, because “8” is considered a lucky number there.
Given that, inquiring minds want to know: Where did China’s 10 other new Dreamliners go?
Analysts say the incident points out some of the issues inherent in selling jets to China.
“Coordinating China orders isn’t as easy as people think,” said Teal Group analyst Richard Aboulafia.
The Chinese government owns a piece of all the nation’s airlines, and a Chinese government agency coordinates aircraft purchases on their behalf. To land the deal, Boeing had to negotiate with the six purchasing airlines – Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines, Shanghai Airlines and Xiamen Airlines – plus the Chinese government, which has the final say on which airlines get what planes.
After the preliminary agreement was signed in January, Boeing began negotiating specifics with the six individual airlines.
It’s a complicated process, Boeing says.
“There are so many different airlines with different perspectives,” said 787 program spokeswoman Yvonne Leach.
If only it were that simple, counters Aboulafia. “Everybody cooperates on purchase activities to make it look like the government is in charge of orders, but it’s more complicated than that,” he said.
Chinese airlines are privatizing and are testing their wings, so to speak, to see how far the government will let them go.
In this case, China Southern is the one airline not ready to sign a contract. China Southern is the most independent and “probably the healthiest” of the six purchasing airlines, Aboulafia said.
Given that, he suspects one of two things: that China Southern is stonewalling Boeing as a negotiating ploy, or that China Southern is stonewalling the Chinese government in a display of independence.
There are also some basic East-West issues to consider, said T.M. Sell, a longtime Boeing watcher who’s just returned from a six-month teaching stint at a Shanghai engineering college.
“There are simply cultural differences in doing business in China,” Sell said.
“You go to bed and you have a deal, and you wake up the next morning and it’s gone. You’ve got to be there all the time to smooth things out,” he said, adding that’s been an issue for Boeing, which has lost some key people from its China sales team.
Officially, Boeing says it’s confident the deal for all 60 will get done. Even if only five airlines are ready to sign right now, that’s still a good thing, Leach said.
“We’re still working with the sixth customer, China Southern,” she said. “If five of them come through, that’s real progress.”
Aboulafia agreed, saying he thinks China Southern will come around eventually.
As summer blockbusters go, “The Puzzling Case of the Ten Missing Dreamliners” is not on par with the new Harry Potter book, Aboulafia said.
“I wouldn’t read too much into it,” he said. “If in six months, China Southern starts making (Airbus) A350 noises, then that’s riveting reading.”
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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