China Eastern Mulls Route-Aircraft Changes as US-China Trade War Escalates

With the list of proposed punitive tariffs in the escalating US-China trade war rising on both sides, China’s second largest carrier, China Eastern Airlines, said it is prepared to change
routes and even the type of aircraft it uses, if the looming trade war between the US and China affected its passenger traffic and cargo volumes, The South China Morning Post reported.

Ma Xulun, China Eastern CEO
Ma Xulun, China Eastern CEO

Ready to take necessary measures
Speaking in Hong Kong after the company issued its 2017 annual results last week, Ma Xulun, China Eastern’s chief executive officer, underlined it would take whatever measures necessary if the
spat escalates, which could include switching its allegiance from Boeing to Airbus when it buys new aircraft. The SCMP report quoted Ma as saying that there were “no winners in any trade war“,
adding “ultimately its a lose-lose situation.“
“China does not want to fight a trade war – but is not afraid of doing so.“ “If the US-China trade war becomes increasingly worse, market conditions will certainly affect our passenger numbers,
cargo volumes and the introduction of new aircraft,“ Ma said.

2017 -best profit for 20 years
China Eastern last week released its best profit in 20 years of 6.35 billion yuan (US$1 billion), boosted by the soaring demand for travel worldwide, and the yuan’s strong performance against its
US counterpart.
However, the carrier still faces pressure from steadily rising fuel costs, which may be further squeezed by the threat of a US-China trade war. Aircraft fuel made up 25% of the airline’s 2017
operating expenses. Eastern currently has around 20 Boeing 777 aircraft in its fleet, with each carrying 314 to 396 passengers, but Ma’s suggestion could mean they are replaced in time by the
slightly smaller Airbus A330-200s, of which the carrier has about 45 in its fleet.

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In the tit-for-tat trade war, Reuters last week reported that China plans to place a 25% tariff on certain US aircraft, in a move expected to affect some older Boeing narrow body models,
according to documents from China’s Ministry of Commerce and the US manufacturer. These include aircraft with an “empty weight“ of between 15,000 kg and 45,000 kg, or 15 to 45 tonnes, the Reuters
report said.
Depending on how “empty weight“ is defined, this leaves a question mark over the fate of Boeings new big-selling 737 MAX 8 jet – though the larger MAX 9 and MAX 10 could be spared. Analysts also
suggested that the weight range appears designed to give protection to Chinese airliner types. While attention has been focused on the application of the tariffs to Boeing aircraft, particularly
the 737NG, the weight range exactly covers China’s own indigenously developed commercial aircraft.
The US exported US$ 15 billion of aircraft to China in 2016, ranking equally with agricultural products like soybeans as the biggest category of goods.

Nol van Fenema

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Source: Cargoforwarder

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