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Boeing losing dominance in China
(Shenzhen Daily)
Updated: 2005-06-16 15:16

In the CEO's office at Xiamen Airlines, one of Boeing's most loyal customers sits beside a photo of a 737 cockpit and describes the humiliation he felt trying to enter the United States last year.

Wu Rongnan runs the only domestic carrier in China that still has an all-Boeing fleet. As he takes a long draw on an English 555-brand cigarette, however, the 62-year-old Wu says the affronts he experienced on his way to Seattle in December were "a bitter pill."

To obtain a visa, he spent three hours in line at the American consulate in far-off Guangzhou and was fingerprinted, something he considers suitable only for criminals. Then, at the immigration counter in Los Angeles, he was treated rudely and escorted to a room for questioning, despite the invitation from Boeing in his hand.

"It must be that America is so rich that they don't want our money," he said. Wu's reaction is a symptom of problems that have compounded to erode Boeing's longtime dominance in China, handing the advantage to European rival Airbus in the world's most promising growth market.

Some of the problems are beyond Boeing's control. But others stem from the company's own mistakes, according to interviews with a range of Chinese airline executives, government officials, former Boeing employees and others.

After its longtime China manager left the company unhappily, a revolving door of executives were dispatched for short-term stints in China.

Since most were unfamiliar with the language and culture, it was harder for them to build strong relationships. As Boeing management focused on keeping costs down and pushing sales, it missed opportunities suggested by its own employees to foster goodwill. And some customers felt Boeing fell short in training and support after they bought its planes.

One manager at China Southern Airlines, China's largest domestic airline, invokes a Chinese proverb to describe Boeing's behavior: "Pick up a sesame seed, lose sight of a watermelon."

In other words, Boeing lost sight of the big picture.

"They've been rather dense in their dealings with China," said Sidney Rittenberg, a noted China expert and business consultant. "People they've had working with China were not that good at reading cross-cultural issues and dealing with the Chinese. The Airbus people have made a science out of it."

Ten years ago, more than eight out of every 10 commercial jets flown in China were Boeing planes. Now about six of 10 are. Airbus' share of new airplane deliveries to China rocketed from 18 percent in 1993 to 67 percent last year, according to Back Aviation Solutions.

Xiamen, this bustling city on China's southeastern coast, illustrates the potential that China holds for both companies. Business travelers from nearby Taiwan are multiplying rapidly. So are local customers like the stylish young tourists strolling along the city's picturesque boardwalk.

In the next two decades, Chinese airlines are expected to triple their fleets, adding 2,300 jets worth nearly US$200 billion.

Recent evidence suggests Boeing may be pulling itself out of its decade-long downturn in China. It hired a veteran China executive to head its Beijing office and improve relations with government leaders. It bounced back strongly this year with the sale of 60 of its new 787 jets to Chinese airlines.

While these are promising signs for Boeing, regaining its dominant role in China may require corporate leadership that is more nimble, humble and ethnically diverse.

Boeing sold its first airplanes to the People's Republic of China in 1972, six years before the United States had formal diplomatic relations with the country. The company blazed a trail of airplane sales right on the heels of President Nixon's historic visit.

A pioneering spirit drove Boeing's early efforts, said James Chorlton, one of the first Boeing salesmen sent to China.

"We used to have people fighting for a chance to go to China," he said. "We wanted to help this country get started. They didn't have enough roads or enough railways, and a billion people were starting to move around."

At that time Chinese found Boeing planes superior to their existing Russian prop planes and British Trident jets.

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