China Aircraft Exports Cleared for Takeoff Under FAA Deal--Update

By Trefor Moss Features Dow Jones Newswires

Just ahead of U.S. President Donald Trump's visit to China, U.S. aviation regulators signed a new pact with their Chinese counterparts that effectively opens the door to selling China-made airplanes and parts to the U.S. and other countries.

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The agreement boosts Beijing's hopes of eventually becoming a global supplier of commercial jetliners and of breaking into a market currently dominated by Boeing Co. and Airbus SE.

The U.S. has a huge trade surplus with China in the aerospace sector, some $14.5 billion in 2015. China accounts for about 20% of Boeing Co. aircraft deliveries and companies including General Electric Co, United Technologies Corp. and Rockwell Collins Inc. provide parts for the new China-built Comac C919 jetliner, which is spearheading the country's effort to establish a top-tier global aerospace industry.

The pact signed last month by the Federal Aviation Administration and the Civil Aviation Administration of China, or CAAC, follows years of talks between the two agencies aimed at speeding approval of planes and parts.

The new regulatory pact would help Comac market the jetliner overseas, and it is holding parallel talks with the European Aviation Safety Agency.

Mr. Trump is scheduled to arrive in Beijing Wednesday, bringing a tough message on the balance of Sino-U.S. trade, which he has long argued is skewed unfairly against America.

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In that context, completing a long-sought pact with China in the lead-up to the president's visit underscored that cooperating with the Chinese authorities to retain access to the China's huge aerospace market remains as much of a priority as extracting trade concessions.

"From a purely symbolic standpoint this is a significant step in U.S.-China trade, and it happened under a president who promised protectionism, particularly with China trade policy," said Richard Aboulafia, vice president at Teal Group Corp., an aerospace intelligence company.

The new C919 seats up to 180 passengers and competes with the Boeing 737 and Airbus A320 jets, with the first expected to enter service around 2020.

However, while Comac has garnered 300 firm orders for the C919, almost all are from Chinese buyers.

Analysts are wary of the C919's appeal in export markets, partly because its performance is expected to trail that of Airbus and Boeing jets and Comac lacks a global support system to finance and maintain aircraft.

The new regulatory pact is a step toward securing better recognition for Chinese aerospace products in export markets. It grants China "comprehensive peer recognition" as an aerospace supplier, the CAAC said. Previously, all American aviation products were eligible for use in China, whereas only a handful of Chinese aviation products could enter the U.S., including rudders and doors for some Boeing jets.

But now all Chinese-built aircraft and aviation components can potentially be sold to U.S. customers thanks to the "mutual recognition" enshrined in the new agreement, the CAAC said.

Airplanes certified by China won't automatically be allowed to fly in U.S. airspace, the FAA stressed: "these products are subject to a validation process...defined in the agreement," which could still include a full technical review. This stops short of similar agreements the U.S. has with regulators in Europe, Canada and Brazil, which all recognize each other's aerospace products.

For Boeing, the new pact also opened the door to securing permission to deliver its new 737 Max jet to Chinese airlines, having warned earlier this year that approval could be delayed until 2018. Boeing delivered the first of those planes to Air China on Friday.

The plane maker is set to open a new facility near Shanghai next year in partnership with Comac to paint 737s destined for Chinese airlines and install seats and other fittings. Airbus opened its first wide-body-jet completion center outside Europe in the northeastern Chinese city of Tianjin, where it already assembles some A320 jets.

Boeing Chief Executive Dennis Muilenburg has credited the new administration with revising its own thinking on how global industry supply chains interact, recognizing how domestic jobs are tied to work carried out overseas.

"We know as we're investing there we're also creating a competitor," Mr. Muilenburg said of China in an interview in May.

Kersten Zhang in Beijing and Doug Cameron in Chicago contributed to this article.

Write to Trefor Moss at Trefor.Moss@wsj.com

(END) Dow Jones Newswires

November 06, 2017 13:52 ET (18:52 GMT)