China is killing Boeing, Part I: As a builder of passenger jets and competitor to COMAC

Bullets:

Boeing and Airbus form the duopoly of firms that manufacture most of the world's passenger jets.

But Boeing (BA) loses billions of dollars every quarter. This, despite a backlog of orders that will take over a decade to clear, products that costs over $100 million each, and serving as the Pentagon's fourth largest military contractor.

Boeing faces severe supply chain issues and production constraints, in addition to well-documented concerns about its safety record.

China's COMAC is a serious rival to Boeing and Airbus, and recently ramped up production of its main offering, the C-919, and will have the C-929 widebody ready by 2027.

With an order book of hundreds of aircraft and robust supply chains, industry experts count COMAC as a strong contender for market share now owned by Boeing.

This will be especially true in the fastest-growing commercial markets in Asia, Africa, and South America, where COMAC will be either the default first choice for airlines, or an acceptable alternative as backlogs and production issues persist at BA and Airbus.

The trade war and the collapse of the aviation industry's global tariff exemptions may be a short-term boost for Boeing in the US market, but will make their planes prohibitively expensive everywhere else.

China has instructed its airlines to refuse deliveries of BA aircraft and parts.

Report:

Good morning. Boeing is an American manufacturer of commercial airliners, as well as a major defense contractor. In the last quarter, Boeing lost $3.8 billion, and the company has lost over $35 billion in the past five years. And it’s hard to imagine how that is even possible. An airliner costs over $100 million dollars, and Boeing has a backlog of orders that goes out years. In other words, Boeing has an order book of thousands of planes and for tens of billions of dollars, and Boeing has huge defense contracts with the Pentagon, who spends more than the next ten countries combined, and the company still manages to lose money.

Boeing, then, is a poorly run company, even in relatively good times, and cannot make money even though the aircraft industry is a duopoly. Their only real competition in that space, today, is Airbus. But the good times are ending for Boeing, and that duopoly is ending. COMAC is a Chinese company which is growing, rapidly, and will eventually take over the markets that are served by Boeing and Airbus. But it will be Boeing that goes away first.

This is the fleet and MRO forecast from Oliver Wyman. MRO in aviation is Maintenance, Repair, and Overhaul. So it’s a comprehensive survey and forecast for how many planes, how many parts, how many passengers, across the world. Today, the industry has a backlog of 17,000 planes, a record high. At current production rates, it will take 14 years to clear those, assuming nobody shows up to order any more. In 2019, the order backlog was 7 years, now it’s 14.

So airlines need to fly planes for longer. Planes are getting older, and that means higher fuel costs. That also means much more maintenance and repairs, and longer flight times to compensate for the fact that there aren’t enough planes. 112 million flight hours per year are forecast for 2035, which is 39% higher than now, and it’s at a record high right now.

China is going to grow its fleet of planes by another 40% during that time, to 2035. Here is Boeing’s report. This is a CMO, Commercial Market Outlook. CMO’s for Boeing and Airbus are rolling, and looks out 20 years, so in this case through 2043.

This is Boeing’s forecast by region, and we can see that the growth in air traffic is going to be primarily in the developing world, and in the Global South/Global Majority countries. South Asia, Southeast Asia, Africa, China, and Latin America—all will grow at 5% or more per year. By comparison, North America will grow at half the rate of South and Southeast Asia. In other words, Asia, Africa, and South America will need a lot more planes, and Boeing and Airbus cannot deliver the planes that are on order now. As for China, it is considered a much more mature market, but still growing fast. 40% of the planes delivered to the Chinese market will be replacement aircraft, with 60% to serve new routes and markets.

This is a unique feature of China’s market as well, that China has an enormous cargo fleet, dedicated to ecommerce. There are huge terminals at the major airports here, which only serve those aircraft and crews. They’re easy to spot, because they don’t have any windows. 70% of all the ecommerce sales in the world are China and US, and most of the factories for those industries are here.

Back to Oliver Wyman, who notes that the order books for planes are rising, but aircraft production is falling. Fewer than 1,300 airplanes were delivered during all of last year, which is 30% below 2018. Passenger traffic is booming, all-time highs, so airlines have no choice but to fly planes for longer, and longer—in terms of how old the planes are—and longer—more time in the air in the same amount of time. It’s a supply chain problem, there aren’t enough raw materials, or facilities to build them, or people to work in those facilities.

COMAC is the Commercial Aircraft Corporation of China. COMAC already represents a challenge to the duopoly of Boeing and Airbus, because commercial aircraft is already going the way all the other manufacturing industries have gone. China owns the supply chains of raw materials needed to build basically everything. China has plenty of facilities, and China has plenty of people.

COMAC will also have China’s market to lose, that’s to say, Chinese airlines and air cargo carriers will buy planes from COMAC as a first choice. South Asia and Southeast Asia markets are literally next door, and buyers there will be looking hard at COMAC, too, especially as these backlogs at Boeing and Airbus drag on. And the news out of COMAC is encouraging to anyone in the airline business, who has no idea where all the planes are going to come from.

By 2029, COMAC hopes that 200 of their C919 jets hit the market, every year. This is telling, too, especially for those who know China. In January—it’s only April now, so just a few months ago, COMAC said they were going to build 50 a year. Now it’s 75, or 50% more. COMAC executives would only set that new goal, publicly, if they had already met their previous one. That’s how it works here, so production at COMAC is scaling up, and quickly. Bottom Line, “COMAC’s capacity boom is a profound shift in aviation”, and the Boeing and Airbus duopoly is living on borrowed time. COMAC is growing aggressively, and COMAC has ready markets and buyers for any plane they build.

COMAC has hundreds of orders, mostly from domestic airlines. And there is more ready demand when COMAC’s planes get approved by regulators in neighboring countries. Vietnam is an example, where regulators are pushing to recognize COMAC’s planes as equivalent to American standards. When that happens, the market there opens up. And consider what it means for an airline, who is waiting for new planes. Especially if it’s a newer airline. You cannot add routes, or passengers, and you’re waiting ten years to get a plane that is delivered today. What Vietnam is doing will be replayed all across Asia, and South America, and Africa. Their domestic airlines can’t get new planes from Boeing or Airbus, but COMAC will be able to supply the market. It will be another instance of either buying from China, or doing without.

The tariff situation is going to scramble up supply chains in complex ways as well, but it will be especially bad for Boeing. Anything coming FROM China has a high tariff, and Boeing buys a lot of components from China to build planes. That all is getting very expensive. Going the other way, Boeing planes just became suddenly much more expensive, because of the reciprocal tariffs. Orders are being canceled, even after the planes have been completed. Airlines are desperate for new planes, but they are walking away anyway because now they cost too much. Juneyao is a budget airline here with a fleet of over a hundred planes, but paused delivery of a new 787. 20% of the demand for new planes in the next 20 years will be here, but Boeing hasn’t had large orders from China since 2019.

And this was all the airlines here, not just Juneyao. China’s government requested that airlines halt buys of planes or parts from US companies. The retaliatory tariffs of 125% more than doubled the cost of anything coming out of US factories. There are 10 - 737 Max planes which are ready for delivery, which at the time was welcome relief for Boeing who had so many problems with the 737 Max.

The Wall Street Journal does a good job of explaining the duty-free status of components that go into building airplanes. That seems to be ending. Boeing is looking at another billion in losses unless China resumes deliveries by the end of this year, and of the 130 planes Boeing has delivered this year, 18 came here. The price of the 737 Max is over $100 million.

But here is the tariff exemption problem: It takes a lot of companies in a lot of countries to produce parts for a commercial airliner, and for decades there were no tariffs applied on any of it. But with the new tariffs, that exemption goes away, and everything sourced from China, or from anywhere, costs a lot more. Airbus has an assembly plant in Mobile, Alabama, others in France and Germany, so all these tariffs on components and materials are going to hit cost structures of Airbus planes in weird ways. Nobody in the industry has any idea what anything is going to cost anymore, and so nobody is doing anything. The entire supply chain for aerospace is being blown up.

Delta Air Lines has no idea what anything is going to cost them—either the new planes or parts for their old ones. So their CEO cut off new orders, and stopped their expansion plans. Delta had big orders for Airbus planes that are supposed to arrive this year, and the company said don’t even bother if they’re going to have a high tariff on them. If the tariff is 20%, suddenly the math doesn’t work. Delta went through this before, during the first Trump administration, and had a clever workaround by taking delivery in a different country, then leasing the plane to service routes in the United States.

But nobody really believes that will work this time. The False Claims Act is a law that the Justice Department could employ here against something as obvious as that, and the fines are three times the amount of underpaid tariffs, and it’s also a criminal violation that could see airline executives going to jail. So it’s easier just to do what Delta did, and say they’re not taking new planes this year.

And further up the supply chain, companies are doing the same thing. Howmet Aerospace makes fasteners, and that doesn’t seem significant compared to engines and wings. But Howmet declared a force majeure event, and disclaimed their responsibility to fulfill contracts to supply fasteners. With all the other problems Boeing has got, here’s another one for them. The supply chain is getting jammed up, and Boeing doesn’t get the parts it needs to build planes. Just one nut, or bolt, or a fastener from Howmet Aerospace, and the supply chain doesn’t work.

Boeing stock went up after Delta pushed back the Airbus order, as investors thought that would clear a path for Boeing to take sales from Airbus in the US market. So these high tariffs are to Boeing’s benefit, in the US market. But most of Boeing’s planes on order, are for airlines outside the US, and Airbus is much more likely to gain market share in the rest of the world. The tariffs would be Airbus’ benefit everywhere outside the United States. In China, Boeing is at risk of being locked out forever, which would be to Airbus’ benefit. And to the benefit of COMAC.

Going back to this chart again, from Boeing’s forecast: COMAC doesn’t care if they never sell a plane in Europe or North America. Why bother to even try? COMAC will have the China market just by showing up. And for all the markets here that have big growth plans, unless Boeing and Airbus figure out how to build planes a lot faster than they are now, COMAC will sell every single plane they build.

These markets will belong to the company that can build planes, it is as simple as that. The company that has the supply chains for planes, the highly-trained machinists and technicians who can build them. and the replacement parts for them. The industry capacity to ramp up production to meet the demand from airlines. And Boeing and Airbus can’t do those things now.

Resources and links:

Bloomberg, Who Pays for Aerospace Tariffs? Maybe No One https://www.bloomberg.com/news/newsletters/2025-04-11/delta-pushback-on-trump-tariffs-risks-paralysis-in-aerospace-supply-chain

Wall Street Journal, Boeing, Airbus Set to Lose 45-Year Duty-Free Status https://www.wsj.com/livecoverage/trump-tariffs-trade-war-stock-market-04-03-2025/card/boeing-airbus-set-to-lose-45-year-duty-free-status-cuLTcx7Zq4LhG9Vjuqbr?mod=article_inline

Boeing posts $3.8 billion Q4 loss and has lost more than $35 billion since fatal crashes in 2019

https://www.king5.com/article/money/business/boeing-q4-loss/281-0ef42ba6-9880-4f1f-a38f-9495601110a6

Boeing’s crisis is getting worse. Now it’s borrowing tens of billions of dollars https://edition.cnn.com/2024/10/15/investing/boeing-cash-crisis/index.html

Wall Street Journal, China Goes After Boeing, Tells Airlines Not to Order New Aircraft From U.S. Jet Maker

https://www.wsj.com/livecoverage/stock-market-trump-tariffs-trade-war-04-15-25/card/china-goes-after-boeing-tells-airlines-not-to-order-new-aircraft-from-u-s-jet-maker-8Tig6sST73fWP52Hdf0q

Bloomberg, China Orders Boeing Jet Delivery Halt as Trade War Expands https://www.bloomberg.com/news/articles/2025-04-15/china-tells-airlines-stop-taking-boeing-jets-as-trump-tariffs-expand-trade-war

Bloomberg, Chinese Airline Delays Boeing Jet Delivery as Tariffs Surge https://www.bloomberg.com/news/articles/2025-04-11/chinese-airline-delays-boeing-jet-delivery-as-tariffs-escalate

Trade War Turbulence: China Halts Boeing Jet Deliveries For Airlines https://www.zerohedge.com/markets/trade-war-turbulence-china-halts-boeing-jet-deliveries-airlines

Comac ramps up challenge to Boeing and Airbus with plans to boost C919 production capacity

https://www.scmp.com/economy/china-economy/article/3303361/comac-ramps-challenge-boeing-and-airbus-plans-boost-c919-production-capacity

COMAC to Produce 75 C919 Jets to Challenge Airbus and Boeing Dominance https://aviationa2z.com/index.php/2025/03/23/comac-to-produce-75-c919-jets-to-challenge-airbus-and-boeing-dominance/

Forbes, Aircraft Production Hurdles Create Record Order Backlog, Older Fleet https://www.forbes.com/sites/oliverwyman/2025/02/27/aircraft-production-hurdles-create-record-order-backlog-older-fleet/

Oliver Wyman, Global Fleet And MRO Market Forecast 2025-2035 https://www.oliverwyman.com/our-expertise/insights/2025/feb/global-fleet-and-mro-market-forecast-2025-2035.html

Reuters, Vietnam regulator proposes approval of Chinese COMAC jets, documents show

https://www.reuters.com/business/aerospace-defense/vietnam-regulator-proposes-approval-chinese-comac-jets-documents-show-2025-03-13/

Boeing Commercial Market Outlook, 2024-43

https://cmo.boeing.com/

Wall Street Journal, Boeing Hit From All Sides in Trump’s Trade War https://www.wsj.com/business/airlines/boeing-hit-from-all-sides-in-trumps-trade-war-cdc616d6

Ranked: The 15 Largest Defense Budgets in the World https://www.visualcapitalist.com/largest-defense-budgets-in-the-world/

Boeing Aerospace (BA) stock chart from CNBC