March 14, 2019 / 11:49 PM / 5 days ago

Q&A-Unpicking China's move to ground Boeing 737 MAX fleet

    By Brenda Goh
    SHANGHAI, March 15 (Reuters) - China's aviation regulator
gained global attention when it became the first to ground
Boeing's        737 MAX aircraft following Sunday's deadly plane
crash in Ethiopia.
    China is the world's biggest user of the 737 MAX planes,
with its airlines flying 97 of the global fleet of 371.
    Its state media outlets such as the People's Daily newspaper
have since Monday crowed about how the country was the first to
do so and called for Boeing to ensure the safety of the plane. 
    Below are questions and answers on China's regulator, the
Civil Aviation Administration of China (CAAC), its decision to
ground the planes and the country's relationship with Boeing. 
    
    WHAT IS THE CAAC?
    The CAAC oversees civil aviation in China, such as
certifying aircraft and airlines and investigating accidents. It
reports to the Ministry of Transport. 
    Its responsibilities are similar to those of the U.S.
Federal Aviation Administration (FAA) and the European Aviation
Safety Agency (EASA). 
    It has also overseen the improvement of Chinese airlines'
overall safety record after a series of crashes in the 1990s and
early 2000s. 
    
    WHY DID CAAC GROUND THE BOEING 737 MAX?
    The CAAC asked Chinese airlines to stop flying the planes
early on Monday, as the Ethiopian Airlines crash appeared to
have similarities to the Lion Air crash in October involving the
same plane.
    "Given that two accidents both involved newly delivered
Boeing 737-8 planes and happened during take-off phase, they
have some degree of similarity," the CAAC said, adding the step
was in line with its principle of zero tolerance of safety
hazards. The 737 MAX 8 is sometimes referred to as the 737-8.
    Li Jian, deputy head of the Chinese regulator, also told
media this week that regulators were "uncertain whether pilots
have the courage or capability to fly" the plane and said that
they were concerned about technical issues raised by the Lion
Air investigation.

    
    WHAT'S THE SIGNIFICANCE OF CAAC'S QUICK DECISION?
    The CAAC has historically taken its cue from the FAA, which
traditionally would have set the regulatory tone on such an
incident as it has chief oversight over Boeing.
    However, the CAAC's confidence has increased with the growth
of the country's aviation industry, which is expected to
overtake the United States as the world's largest in the next
decade. Beijing is also eager to develop its own fledgling
commercial aircraft sector.
    Western industry sources say China has in recent years
striven to assert its independence as an air safety regulator as
it negotiates mutual safety standard recognition with regulators
in the United States and Europe.
    That comes as China looks to expand its influence in line
with its growing economic clout.
    It signed a mutual recognition deal with the FAA but
industry sources say it has struggled to gain approval from the
FAA that would allow it to sell China's self-developed C919
airliner to Western airlines. 
    
    WHAT DID CAAC DO AFTER THE LION AIR CRASH? 
    The regulator carried out special inspections at airlines
such as China Southern Airlines             and China Eastern
Airlines             which flew Boeing 737 MAX planes.
    The regulator held meetings with airlines to discuss the
Lion Air crash, what "hidden safety dangers" the plane might
have had and asked airlines to revise flight manuals and provide
additional training to pilots and maintenance crew, according to
statements on the CAAC's website.     
    
    DOES CHINA BENEFIT FROM BOEING'S WOES?
    Boeing's sales relationship with China dates back to at
least 1972, when a visit by U.S. President Richard Nixon led to
the introduction of Boeing planes to the country. Boeing now
ships about one in four jets it sells to China. 
    Boeing competes fiercely for business in China against
European rival Airbus          and in December opened its first
737 completion plant in the country, installing interiors and
paints liveries.                          
    The first plane delivered from the centre, which is a joint
venture with state-owned Commercial Aircraft Corp of China
(COMAC)           , was a Boeing 737 MAX 8 whose customer was
the country's flag carrier, Air China            .
    While China is among Boeing's biggest customers, it is also
a key supplier, providing parts for every Boeing jet, including
the 737 MAX, 777 and 787 Dreamliner, and is home to a number of
Boeing joint ventures. 
    In 2015, Boeing said that its activity in China contributed
up to $1 billion annually to the Chinese economy.     
    
    DOES THE GROUNDING HAVE TO DO WITH THE US-CHINA TRADE WAR?
    The CAAC's Li told media that the grounding was due to
safety concerns and not trade frictions. 
    Beijing has also not slapped any tariffs on any Boeing
aircraft, which reflects the fact that any such tariffs could be
eventually passed on to Chinese airlines. Shutting Boeing out of
the market would also mean Chinese airlines would have only one
alternative, Airbus.
    However, the full impact of the U.S.-China trade war on
Boeing remains unclear, as the company did not win any publicly
announced aircraft deals in mainland China last year.
            
    U.S. officials said this week that they hope they are in the
final weeks of discussions with China to hammer out a deal to
ease their tariffs dispute.             

    
 (Reporting by Brenda Goh; Additional Reporting by Stella Qiu
and Shanghai Newsroom; Editing by Nick Macfie)
  
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