Deadly Crashes Unlikely to Impact Boeing’s ‘Symbolic’ China Plant, Analysts Say

Analysts and sources have played down speculation about the future of Boeing Co.’s first overseas completion and delivery center after the company’s flagship model suffered its second deadly crash in just five months.

As aviation authorities around the world scrambled to respond, personnel at the U.S. company’s Completion and Delivery Center, which is located 290km (180 miles) southeast of Shanghai in Zhoushan, were yet to deliver their second plane.

The plant was established in 2016 after a deal between Boeing and a local partner, launched officially in December to coincide with its first delivery of a 737 Max 8 jetliner, which went to state carrier Air China Ltd.

While the Zhoushan plant’s official opening ceremony, which was held in December, attracted hundreds of government officials and industry executives — and was hailed as a milestone by Boeing — analysts and sources told Caixin the crashes were likely to have little impact on the plant.

That’s because the Zhoushan center is chiefly of “symbolic” importance to Boeing as the U.S. company tries to forge good relations with China, said Lin Zhijie, an aviation expert based in the southern city of Xiamen.

“The Zhoushan center plays a limited role in the U.S. company's actual airplane manufacturing process,” he said.

The plant is the result of a $33 million investment from the world’s largest aircraft builder to take a majority stake in a joint venture with state-owned Commercial Aircraft Corp. of China.

Unlike rival Airbus SAS, which established a China production facility in the port city of Tianjin in 2008, Boeing’s Zhoushan plant doesn’t assemble planes nor build them, but mainly engages in final assembly work for the 737 model, including installation of entertainment systems, seats and other interior elements.

Sources familiar with the development told Caixin that the plant has yet to deliver its second plane to date, and construction appeared to be ongoing.

A visit to the site by Caixin last week found the facilities are still being built. Workers onsite said completion is expected by May.

Boeing didn’t immediately respond to Caixin’s request for comment on the status of the plant. But it earlier said the factory would eventually deliver 100 aircraft per year.

An Ethiopian Airlines-operated Max 8 crashed minutes after take-off on March 10, killing all 157 people on board. The same model of aircraft operated by Lion Air crashed into the sea near Indonesia in October, killing all 189 passengers.

Similarities between the incidents prompted aviation regulators around the world, including in China, the U.S., Canada, India and the European Union, to ground either the Max 8 or all Max models last week.

China, the first to ground the 737 Max jets, said it had no timetable for resuming flights of the jetliner. Chinese airlines operate 96 out of the 350 Boeing 737 Max 8 models that the company has delivered worldwide.

“If there is a correlation between the causes of the two recent crashes, we expect the situation to worsen, and lengthy groundings and delivery delays to ensue,” Fitch Ratings said in a note. “Similarities between the Lion Air and Ethiopian Airlines accidents would possibly indicate the presence of a design flaw that would need to be addressed.”

Jason Tan contributed to this report.

Contact reporter Mo Yelin (yelinmo@caixin.com)