In a significant move within the aviation industry, Taiwan’s China Airlines is set to split a major order for long-haul passenger jets between Boeing and Airbus. This decision, which comes after the US presidential election, could have broad implications for both manufacturers and the aerospace sector as a whole.
China Airlines is considering the Boeing 777X and the Airbus A350-1000 models to replace its current fleet of 10 Boeing 777-300ERs. The order could involve up to 20 new passenger jets, with the possibility of an even split between the two aircraft makers. While the decision regarding freighter aircraft remains unresolved, the outcome is likely to be influenced by the political environment following the recent US elections, according to Reuters.
A $4 Billion Decision
The total value of the order is estimated at $4 billion, factoring in standard industry discounts, according to Cirium Ascend, an aviation consultancy. The final number of aircraft and types involved are still under review by the airline’s board, and no official announcement has been made yet.
This order follows China Airlines’ previous decision in 2022, when it placed an order for 16 Boeing 787-9s, underscoring the airline’s commitment to modernizing its fleet. However, despite earlier concerns, the Taiwanese government remains confident that relations with the US will stay strong under the current administration. Hsieh Shih-chien, Chairman of China Airlines, has stressed that fleet decisions are made based on business considerations, not political influence.
Impact of Geopolitical Tensions on the Aerospace Industry
The aerospace sector has been in the spotlight, with major players like Boeing and Airbus facing increased scrutiny, especially regarding their valuations. The broader defense and aerospace industry has seen a strong return in 2023, with a remarkable 22% year-to-date gain, driven by geopolitical tensions and growing defense budgets.
Boeing recently settled a seven-week labor strike, securing a significant pay increase for its workers, which may influence production costs. Meanwhile, Airbus has maintained its strong position in the market, securing 85 new orders in September 2024. This potential order from China Airlines could further strengthen Airbus’s market share, possibly prompting Boeing to offer more competitive terms to secure its portion of the deal.
A Key Moment for Boeing and Airbus
This decision from China Airlines is set to send ripples throughout the aerospace industry. Analysts and investors will be closely monitoring the outcome, as the $4 billion order will not only impact the financial performance of Boeing and Airbus but also provide important insights into the future dynamics of the aviation sector in a post-election climate.
