Thin Margins, Long Cycles – Why Are Boeing Orders a "Must" for Both China and the US?

Following his visit to China this May, U.S. President Donald Trump's first announcement to the media was not about tariffs, artificial intelligence (AI), chips, or rare earth cooperation, but rather an order for Boeing aircraft.

Trump stated that China had agreed to purchase 200 Boeing passenger jets, and that the order could potentially expand to 750 units if cooperation proceeds smoothly.

This announcement attracted significant attention, as China has in recent years been actively advancing its domestically developed large passenger aircraft, the C919, while also continuing to procure aircraft from European manufacturer Airbus.

Since the onset of the trade war in 2017 and the two successive crashes of the Boeing 737 MAX, China had virtually ceased new orders for Boeing passenger aircraft. The resumption of orders now undoubtedly sends a notable signal.

Why Buy Boeing?

For airlines, purchasing aircraft is never a one-time transaction.

The official list price of a Boeing 737 or Airbus A320 ranges from approximately $110 million to $130 million. However, the real profitability lies not in selling the aircraft itself, but in the maintenance, repairs, parts supply, and technical support required over the following two to three decades.

This is why the aviation industry often cites the classic analogy of the "razor and blade" business model.

An aircraft is like the razor handle – it can be sold at a discount or even with slim margins. The sustained profit comes from the parts, repairs, and services that must be replaced and renewed over decades, much like the recurring purchase of razor blades.

Although third-party maintenance providers exist in the market, critical components such as engine blades and landing gear remain highly dependent on original equipment manufacturer (OEM) supply.

Therefore, China's purchase of Boeing aircraft is not merely about adding 200 new planes – it is also about ensuring that its substantial in-service Boeing fleet continues to receive parts, maintenance, and technical support for decades to come.

Another important factor is avoiding over-reliance on a single supplier.

If all future large passenger aircraft procurements were concentrated on Airbus, the European manufacturer would gain greater leverage in pricing, delivery schedules, and future negotiations.

Maintaining Boeing as another major supplier helps keep the market competitive and reduces supply chain risks.

In fact, this is not a strategy unique to China. Singapore Airlines and most major global carriers simultaneously operate both Boeing and Airbus fleets to diversify risk and retain greater procurement flexibility.

Is Aircraft Manufacturing a Low-Profit Business?

Perhaps surprisingly, aircraft manufacturing is not a high-margin business.

As of April 2026, Boeing and Airbus had a combined backlog of 16,683 undelivered orders. At current production rates, new orders may face delivery wait times of approximately 12 years.

A backlog stretching over a decade sounds like a guaranteed money-making proposition – but the reality is quite the opposite.

Aircraft manufacturing is an industry characterized by high capital investment, long R&D cycles, and low tolerance for error. Every component, every certification, and every test requires enormous investment, because a single accident involves loss of life.

Moreover, the interval from contract signing to delivery often spans ten years or more. Over that period, raw material and labor costs continue to rise, while the aircraft price is typically fixed at the time of contract signing. Manufacturers find it difficult to fully pass on cost increases, leaving profit margins highly vulnerable to inflation.

Boeing is the most telling example – the company posted a loss of $11.8 billion in 2024. Even though the group returned to profitability in 2025, its commercial aircraft division continued to sustain losses.

Its competitor, Airbus, posts a net profit margin of approximately 6% to 7%, far below the 20% to over 30% margins enjoyed by technology companies such as Apple and Microsoft.

These figures demonstrate that selling aircraft is, in fact, far less profitable than selling software or smartphones.

Why Would Trump Secure Orders for a "Money-Losing" Business Like Boeing?

If Boeing's profitability is hardly remarkable, why does Trump place such high importance on it? The reason is that Boeing sells far more than just aircraft.

Behind every Boeing aircraft lies a network of over 10,000 suppliers, spanning all 50 U.S. states.

It involves countless components – engines, avionics, airframes, landing gear – and thus relies on a vast network of suppliers across the country.

For Trump, therefore, the order for 200 aircraft represents not only multi-billion-dollar business but also underpins a massive manufacturing supply chain and tens of thousands of jobs.

As such, this order is both an economic achievement and a political trophy that Trump can showcase to voters.

Today, an aircraft is no longer merely a mode of transportation or a commodity – it simultaneously represents manufacturing capability, national industrial strength, and international political influence. China needs a stable aviation supply chain, the U.S. aims to preserve its manufacturing base and employment, and the Boeing order happens to serve as a mutually acceptable exchange of interests.