By Tim Hepher, Brenda Goh
PARIS (Reuters) -China has decided to grant exemptions from import tariffs for some aircraft parts, including jet engines, the head of French engine maker Safran (EPA:SAF) said on Friday.
"We learned last night that China has taken the decision not to tax engines or landing gear or nacelles (engine housings), in other words a certain number of aerospace equipment parts," CEO Olivier Andries told reporters on a first-quarter results call.
"It demonstrates that the situation is very fluid," he said, adding that finished aircraft were not included in the decision.
China is considering exempting some U.S. imports from its 125% tariffs and is asking businesses to identify goods that could be eligible, business groups in China said on Friday.
The possible dispensation is the latest sign the world’s two largest economies are prepared to try to calm a trade war that has seen Boeing (NYSE:BA) repatriate some undelivered jets and threaten to sell jets locked out of China to other airlines.
Together with GE Aerospace, Safran co-produces LEAP jet engines for best-selling Boeing and Airbus narrow-body jets, as well as China’s COMAC C919 jetliner.
Factories are based in France and the United States and GE and Safran are responsible for different parts of the engine, which is the sole powerplant available on the Boeing 737 MAX and competes with U.S.-based Pratt & Whitney on the Airbus A320neo.
EXEMPTION LIST
Andries did not say whether Safran had received the positive signal on tariffs directly from Chinese authorities. CFM has been present in the country since 1985 and its customers include state airlines and national aerospace champion COMAC.
A list of 131 categories of products eligible for exemptions was circulating widely on social media and among businesses and trade groups in China on Friday.
Reuters could not verify the list, whose items ranged from vaccines and chemicals to jet engines.
A waiver for engines and parts would lift some uncertainty over the availability of spares and services needed for China’s carriers to keep their fleets in the air.
Parts for repairs are already in high demand due to shortages of new planes driven by snags in the supply chain.
One Western industry official said Chinese airlines were understood to be requesting carve-outs or exemptions for some imports. Chinese officials could not be reached for comment.
European planemaker Airbus also relies on supplies of CFM engines and competing models from Pratt & Whitney for the assembly of some of its jets in the port city of Tianjin.
Airbus was not immediately available for comment.
Finally, China’s own domestic passenger jet, the C919, relies on CFM engines and other Western parts though China has embarked on efforts to develop a home-grown alternative engine.
Suppliers of significant parts for China’s first fully developed passenger jet include RTX unit Collins Aerospace, Honeywell (NASDAQ:HON) and half a dozen other mainly U.S. suppliers.
None of the companies responded to requests for comments.