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For Boeing’s Mounir, Virus’s Effect on Airlines More Concerning than Supply Chain Impact

Boeing hasn’t yet seen significant disruption to its supply chain due to plant closures in China in reaction to the Novel Coronavirus, but the effect on Chinese airlines and potentially the region’s economy represents a more pressing concern, Boeing Commercial Airplanes vice president of sales and marketing Ihssane Mounir said during a Wednesday “roundtable” discussion at the Singapore Airshow.

Although he stressed it remains “too early” to tell how severely the crisis will affect the industry and the region’s economy, the fact that Chinese airlines have already cut capacity by 70 percent reflects the gravity of the crisis. “I think it is too early to talk about the bottom line in detail, but the one thing that is certain it will impact revenues,” said Mounir. “We’ve seen it already…You have business trips not happening. You have cargo not going in and out. It will have an impact on the economy; it will have an impact on revenues; it will have an impact on these carriers.”

In fact, China-related pressures wholly unassociated with the virus have already hurt Boeing itself. The de-facto embargo on commercial airplane deliveries from the U.S. resulting from the tariff wars between the two countries has effectively halted sales for nearly two years to what has become Boeing’s single biggest widebody market.

Again, Mounir said it remained too early to tell how the virus crisis might exacerbate or prolong the negative effects the trade war has already produced. “We’ve got to see how this is going to be managed,” he stressed. “Right now their telling folks not to come back to work until the 25th of February or the first of March. So people need to get back to work and start looking at their plans.

“But right now the more immediate impact is on the deliveries that we have in Seattle. We have some 787s, some triple sevens that we simply can’t deliver, and that’s probably going to push to the right.”

Still, over the long term, Mounir sees China continuing its annual traffic increases from “high single-digit, low double-digit” rates, resulting in pent-up demand rather than overhang of supply in that country and in Asia as a whole. As for the virus, Mounir opined that authorities have managed this crisis more effectively than the SARS epidemic in 2003. “So I would think the recovery will be more orderly and more efficiently than we saw back in 2003 with SARS. So I remain optimistic,” he concluded.

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