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Q&A: Unpicking China’s move to ground Boeing 737 MAX fleet

SHANGHAI (Reuters) – China’s aviation regulator gained global attention when it became the first to ground Boeing’s 737 MAX aircraft following Sunday’s deadly plane crash in Ethiopia.

FILE PHOTO: Boeing 737 MAX aircraft are parked at a Boeing production facility in Renton, Washington, U.S., March 11, 2019. REUTERS/David Ryder

China is the world’s biggest user of the 737 MAX planes, with its airlines flying 97 of the global fleet of 371.

Its state media outlets such as the People’s Daily newspaper have since Monday crowed about how the country was the first to do so and called for Boeing to ensure the safety of the plane. (here)

Below are questions and answers on China’s regulator, the Civil Aviation Administration of China (CAAC), its decision to ground the planes and the country’s relationship with Boeing.

WHAT IS THE CAAC?

The CAAC oversees civil aviation in China, such as certifying aircraft and airlines and investigating accidents. It reports to the Ministry of Transport.

Its responsibilities are similar to those of the U.S. Federal Aviation Administration (FAA) and the European Aviation Safety Agency (EASA).

It has also overseen the improvement of Chinese airlines’ overall safety record after a series of crashes in the 1990s and early 2000s.

WHY DID CAAC GROUND THE BOEING 737 MAX?

The CAAC asked Chinese airlines to stop flying the planes early on Monday, as the Ethiopian Airlines crash appeared to have similarities to the Lion Air crash in October involving the same plane.

“Given that two accidents both involved newly delivered Boeing 737-8 planes and happened during take-off phase, they have some degree of similarity,” the CAAC said, adding the step was in line with its principle of zero tolerance of safety hazards. The 737 MAX 8 is sometimes referred to as the 737-8.

Li Jian, deputy head of the Chinese regulator, also told media this week that regulators were “uncertain whether pilots have the courage or capability to fly” the plane and said that they were concerned about technical issues raised by the Lion Air investigation.

WHAT’S THE SIGNIFICANCE OF CAAC’S QUICK DECISION?

The CAAC has historically taken its cue from the FAA, which traditionally would have set the regulatory tone on such an incident as it has chief oversight over Boeing.

However, the CAAC’s confidence has increased with the growth of the country’s aviation industry, which is expected to overtake the United States as the world’s largest in the next decade. Beijing is also eager to develop its own fledgling commercial aircraft sector.

Western industry sources say China has in recent years striven to assert its independence as an air safety regulator as it negotiates mutual safety standard recognition with regulators in the United States and Europe.

That comes as China looks to expand its influence in line with its growing economic clout.

It signed a mutual recognition deal with the FAA but industry sources say it has struggled to gain approval from the FAA that would allow it to sell China’s self-developed C919 airliner to Western airlines.

WHAT DID CAAC DO AFTER THE LION AIR CRASH?

The regulator carried out special inspections at airlines such as China Southern Airlines and China Eastern Airlines which flew Boeing 737 MAX planes.

The regulator held meetings with airlines to discuss the Lion Air crash, what “hidden safety dangers” the plane might have had and asked airlines to revise flight manuals and provide additional training to pilots and maintenance crew, according to statements on the CAAC’s website.

DOES CHINA BENEFIT FROM BOEING’S WOES?

Boeing’s sales relationship with China dates back to at least 1972, when a visit by U.S. President Richard Nixon led to the introduction of Boeing planes to the country. Boeing now ships about one in four jets it sells to China.

Boeing competes fiercely for business in China against European rival Airbus and in December opened its first 737 completion plant in the country, installing interiors and paints liveries.

The first plane delivered from the center, which is a joint venture with state-owned Commercial Aircraft Corp of China (COMAC), was a Boeing 737 MAX 8 whose customer was the country’s flag carrier, Air China.

While China is among Boeing’s biggest customers, it is also a key supplier, providing parts for every Boeing jet, including the 737 MAX, 777 and 787 Dreamliner, and is home to a number of Boeing joint ventures.

In 2015, Boeing said that its activity in China contributed up to $1 billion annually to the Chinese economy.

DOES THE GROUNDING HAVE TO DO WITH THE US-CHINA TRADE WAR?

The CAAC’s Li told media that the grounding was due to safety concerns and not trade frictions.

Beijing has also not slapped any tariffs on any Boeing aircraft, which reflects the fact that any such tariffs could be eventually passed on to Chinese airlines. Shutting Boeing out of the market would also mean Chinese airlines would have only one alternative, Airbus.

However, the full impact of the U.S.-China trade war on Boeing remains unclear, as the company did not win any publicly announced aircraft deals in mainland China last year.

U.S. officials said this week that they hope they are in the final weeks of discussions with China to hammer out a deal to ease their tariffs dispute.

Reporting by Brenda Goh; Additional Reporting by Stella Qiu and Shanghai Newsroom; Editing by Nick Macfie

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