Hey, Sichuan Airlines, don’t you need planes for those engines?

One of our main priorities here at ATW is tracking the flurry of transactions around the globe in which airlines order aircraft and, by extension, engines to power those aircraft. This is generally pretty straightforward, with Airbus or Boeing (or Embraer or Bombardier) announcing an order by a given airline, or the airline itself announcing the order, or the manufacturer and airline making a joint announcement.

But the process is not always this simple, which can sometimes make life a bit challenging for the intrepid aviation journalist. When it comes to Chinese airlines especially, aircraft orders are often somewhat mysterious.

Wednesday morning, a Pratt & Whitney news release came across my desk: Sichuan Airlines was signing a memorandum of understanding with Pratt to buy PW1100G geared turbofan engines to power a fleet of 24 Airbus A320neos. Just one thing: Sichuan Airlines has never announced an order for A320neos!

Had I missed something? I searched our archives, and the Internet, and Airbus’s order records. Nothing. Yes, Chengdu-based Sichuan is a huge operator of A320 family aircraft, with more than 90 in its fleet, and its executives have talked in the past about potential interest in the A320neo, an aircraft that would make a lot of sense for a carrier with an all-Airbus fleet comprised mostly of A320 family aircraft.

But neither Sichuan nor Airbus has ever said the airline is buying or leasing A320neos (according to Pratt, the carrier’s A320neo fleet will comprise 15 purchased and nine leased aircraft). Airbus did not respond to an inquiry on the matter.

The most likely explanation: China Southern Airlines, which owns 39% of Sichuan and has ordered 50 A320neos and also agreed to lease 24 A320neos from AerCap Holdings, has likely decided that 24 of those A320neos will be allocated to Sichuan.

This is part of what makes aircraft transactions in China so hard to track. The big airlines (China Southern, Air China and China Eastern) are all majority-owned by the Chinese government. These airlines in turn have huge ownership stakes in smaller carriers like Sichuan Airlines, which is also 40% owned by the provincial government of Sichuan.

This means the Chinese government itself can order aircraft and distribute them among airlines. And Air China or China Eastern or China Southern can order aircraft, but then place some or all of those aircraft with other airlines in which they have stakes. So the orders, even when announced, are not entirely clear cut. Orders by Chinese airlines, even fairly major ones, are often revealed by the carriers making brief statements to the Shanghai stock exchange—about which there is usually no advance publicity.

So sometimes you find out about a Chinese airline’s plans to buy/operate/lease particular aircraft by, say, an engine manufacturer issuing a press release on an MOU it signed with the airline for engines to power those aircraft.

All of which brings me to Chinese President Xi Jinping’s Sept. 23 visit to Boeing’s aircraft manufacturing facilities in Everett, Washington. Barack Obama doesn’t have anything to do with Delta Air Lines ordering aircraft, François Hollande plays no role in developing Air France’s fleet strategies and Stephen Harper isn’t deciding how many and which aircraft Air Canada and WestJet should be operating on which domestic and international routes.

But in a sense, Xi Jinping sits atop the complicated structure in which these types of decisions are made in China, a massive and growing air transport market (Boeing delivered 155 aircraft to China in 2014) in which overall market demand is projected and then aircraft are ordered and allocated based on that projection.

Boeing is not just hosting a head of state who will put on a hard hat and goggles and tour the plant floor as cameras flash away. There will be some of this, undoubtedly, but there is also likely to be a substantive meeting in which Boeing president and CEO Dennis  Muilenburg and Boeing Commercial Airplanes president and CEO Ray Conner will, in essence, make a sales pitch to Xi and his staff not entirely unlike one they would give to the CEO of a major airline. Or, more accurately, the CEO of a major airline group like IAG or LATAM. Xi, after all, heads a government that owns three airlines (Air China, China Southern and China Eastern) that combined generate more revenue than American Airlines, the world’s largest airline, operating a combined fleet of more than 1,130 aircraft.