Boeing Hopes for Huge Market as Its Planes Fly Across China’s TV Sets
There are few places in the world that haven’t been visited by Boeing jetliners, but even some Boeing officials are surprised to learn the company’s airplanes are flying across the 45 million TV screens in China.
Boeing, the first American company to do business with China after relations were normalized in 1972, is one of a handful of U.S. firms advertising on Chinese television.
“There are two reasons people consider and use this program,” said Charles Walsh, vice president of advertising sales for CBS Worldwide Enterprises, which put together a package of American programming and advertising for Chinese television.
“There are the guys who are long-term visionaries, who see 1 billion people and have faith that sometime soon--and maybe sooner than they think--you can go down to the corner store and buy cola or Band-Aids.
Wants to Sell Planes
“Boeing, on the the other hand, is there to sell airplanes.”
Recently, Boeing announced the sale of eight more aircraft to China--five 737-200s, two 767s and one 747.
That deal, worth more than $350 million, pushes Boeing’s sales in China since 1972 to 35 airliners valued at close to $1 billion.
But much of the allure of China seems to be related to the future.
Although $1 billion in sales is not insignificant, Boeing had revenues of $10.4 billion in 1984 alone, $6 billion in commercial airplane sales.
“It’s a significant market because China is large geographically,” said Wolfgang Demisch, aerospace analyst for First Boston. “But China is trying to use an economy the size of France to feed a billion people. It means there’s not that much butter to spread around.”
Demisch said 20 years from now China may be in position to build up an economy of substance. “China is about the size (geographically) of the United States and the travel requirements could be significant.”
Profit margins may be thin; profits in general in commercial airplanes have been slim for Boeing in recent years--$32 million last year on the $6-billion sales.
Moreover, the Chinese are known to drive a hard bargain.
China has concluded deals this year with each of Boeing’s two top competitors--McDonnell Douglas and Airbus Industrie. The deal with McDonnell Douglas is a joint venture in which China will take part in manufacturing at least 25 MD-80 commercial airliners in Shanghai.
“Sure it’s competitive,” said a Boeing official. “They’re obviously not in our pocket. McDonnell Douglas works very hard over there. So does Airbus.”
Another unknown is the proposed decentralization of China’s airline system.
The central agency known as the Civil Aviation Administration of China will continue to exist, but several regional carriers are being established. In January, the regional carrier in China’s Yunnan Province concluded a deal with Boeing for two 737-200s.
“It offers the market an opportunity to be split several ways, with each regional carrier developing some preferred supplier,” said Demisch, adding that that doesn’t necessarily mean a dramatically expanded market.
Boeing is paying $300,000 for 32 minutes of commercial time on Chinese television this year.
Its ad--categorized as a corporate image ad--features several Boeing airplanes gliding across the screen while a narrator describes the company and its products in Mandarin Chinese.
John McKenzie, an analyst who follows Boeing for Foster & Marshall in Seattle, says the advertisement is intended to build good will.
“It’s getting your foot in the door in what ultimately could be a huge market,” he said.
“But it will take time,” he said. “I wouldn’t look for an immediate explosion of orders.”