The United States and the European Union agreed on June 15 a truce in their near 17-year conflict over aircraft subsidies. The two sides have been battling since 2004 in parallel cases at the World Trade Organization over subsidies for U.S. planemaker Boeing (BA.N) and European rival Airbus (AIR.PA), which each argued exposed the other to unfair competition.
On June 17, the United States and Britain reached a similar agreement to resolve their dispute over aid for Boeing and Airbus and focus on tackling Chinese subsidies, echoing the five-year tariff truce announced by Washington and Brussels.
The announcements come at a moment in which the aerospace industry is wrestling with the reluctance of most airlines to take delivery of jets as they struggle to save cash, and a drop in air traffic that Airbus says could take until 2023 or 2025 to regain the pre-pandemic levels of 2019. In the same context, China aims to challenge Boeing and Airbus with the development of its own single-aisle plane.
In 2020, Airbus delivered 566 aircraft, a 34% drop from 2019. This was the end to 17 years of consecutive record production. In the same period, Boeing delivered 157 aircraft, a 57% less than in 2019 and just 20% of 2018’s record production of 806.
Beyond the effects of the pandemic felt across the whole industry, the grounding of the 737 MAX weighed heavily on Boeing deliveries last year.
At the same time, the revenue passenger miles —the metric that shows the number of miles traveled by paying passengers in the air industry— dropped dramatically in 2020 as a consequence of the pandemic after years of sustained grow with consecutive annual records since the 2008–09 financial crisis. Global airlines reported losses of about $370 billion.
The two companies have been for decades the two main competitors in the market of commercial aircrafts.
Although the underlying trade relationship remains fragile with many unresolved disagreements, according to diplomats and trade experts, both companies agreed to set aside tariffs to focus on fighting China’s clear ambition to build and sell its own commercial aircraft.
Industry sources told Reuters that United Airlines (UAL.O) is in talks to buy around 200 single-aisle jets in a multibillion-dollar revamp set to benefit both Boeing (BA.N) and Airbus (AIR.PA).
COMAC’s C919 aircraft is a planned medium-haul jet with 158 to 168 seats, and a range of 4,075 to 5,555 kilometers, expected to be certified by China later this year after delays.
The C919 is designed to compete with the Boeing 737 MAX and Airbus 320neo families. Russia is mounting a similar challenge with its MS-21 and Brazil’s Embraer is established in the market for slightly smaller jets.
Experts say China’s COMAC is a future third option in the market for planes with more than 100 seats due to Beijing’s finances and the size of its domestic market. The Chinese supplier claims a total of 815 orders have been obtained from 28 customers.