Isolation Escalates As Chinese Airline Ends Flights To North Korea

It"s barely been a day since President Donald Trump revealed that the US would once again label North Korea a state sponsor of terrorism and impose broad new sanctions against its government and senior officials, and already more bad news for the restive communist state has emerged. This time, the Associated Press is reporting that Air China, a state owned airline, is canceling flights to North Korea, leaving the North"s troubled Air Koryo as the only airline operating flights between North Korea and its primary economic benefactor.

Flights were “temporarily suspended due to unsatisfactory business operations,” said an employee of Air China’s press office who would give only his surname, Zhang, according to the AP. The suspension was blamed on falling demand for the routes. A foreign ministry spokesman, Lu Kang, said he hadn’t heard about Air China’s cancellation. He said such decisions would be made based on the “state of operation and the market.”

Beijing has supported UN sanctions on North Korean exports meant to pressure the government of leader Kim Jong Un to drop its pursuit of nuclear and missile technology, but China has argued against measures that would harm ordinary North Koreans.

Since mid-summer, the UN Security Council has passed two rounds of sanctions (with China"s approval) that impose strict limitations on exports of North Korean seafood, coal and other raw materials. And Trump said the Treasury will outline more restrictions to be imposed against the North and senior government officials in the coming weeks. Since Air China is state-owned, the cancellation of the routes received at least tacit government approval. But since the sanctions have choked off much of the North"s legitimate economy, it"s possible the routes were eliminated to prevent the airline from losing money, forcing the government to intervene with subsidies. Back in September, China kicked out North Korean businessmen and instructed its banks not to do business with North Koreans or North Korean-owned businesses.

To be sure, Airlines have been rolling back flights to North Korea for months.

Airlines have steadily reduced the frequency of flights to North Korea as mounting political tensions depressed the already small number of business travelers and tourists visiting the North.

 

Air China Ltd. announced in April it was cutting the frequency of flights to North Korea due to lack of demand. Some other Chinese carriers offered charter services to the North but those also have been canceled.

 

Zhang said the last Air China flight to Pyongyang was Monday and he didn’t know when service might resume.

 

The status of Air Koryo’s flights was unclear. Phone calls to the carrier’s Beijing office weren’t answered. The flight information website for the Beijing airport showed its Pyongyang flight on Tuesday took off as scheduled.

Lu, the foreign ministry spokesman, appealed for measures to ease the tense standoff.

 

“Given the highly complex and sensitive situation on the peninsula, we hope all relevant parties can do something conducive to alleviating the tension and pulling all sides concerned back to the track of negotiation and dialogue to settle the peninsular nuclear issue,” he said at a regular news briefing.

Whether it"s true or not, Trump has shown himself more than willing to take credit for any signs of a chill in relations between the North and China. For example, he boasted about having secured assurances from President Xi that China would continue to help isolated the North"s economy. Though many have speculated that Xi is just flattering his American rival, and that China has no intention of squeezing the North. 

Airbus Takes On Boeing By Striking Deal For Bombardier Ownership Stake

Boeing"s battle to crush Bombardier has encountered an unexpected obstacle.

Bloomberg reports that Airbus SE has agreed to acquire a majority stake in Bombardier Inc.’s C Series program, which the Commerce Department slapped with a 300% tariff it ruled in Boeing’s favor in a complaint alleging Bombardier had benefited from anti-competitive government subsidies.

Under the terms of the deal, Airbus won’t pay a dime up front for the C-Series, but will begin assembling the technologically advanced by poor-selling jetliner in the US in what Bloomberg said could be an effort to circumvent the tariffs.  Airbus is adding another final assembly line for the C-Series at its factory in Mobile, Alabama, which will serve US customers and complement production in Canada, according to a company statement late Monday. However, Bloomberg says it’s unclear if the deal will allow the C-Series to avoid the tariffs.

It’s too soon to say if the new Alabama production line would enable the C Series to avoid U.S. tariffs. The duties were applied to C Series planes “regardless of whether they enter the United States fully or partially assembled,” according to a U.S. government fact sheet on the matter. Boeing said Airbus and Bombardier were just trying to get around the restrictions.

As part of the deal, Airbus will assume just over half of the interest in a partnership controlling the C-Series. Bloomberg says the European planemaker’s marketing muscle and production expertise boosts the viability of the all-new aircraft after more than $6 billion in development costs forced Bombardier to rely on government assistance.

The deal also thrusts Airbus into the middle of a trade spat between the two North American aerospace firms. In response to the Commerce Department’s ruling, Canadian Prime Minister Justin Trudeau canceled military equipment orders with Boeing, adding that they wouldn’t be reinstated until Boeing drops its complaint against Bombardier.

Boeing filed its complaint in April after Delta Air Lines agreed to buy 75 of the C-Series in a deal worth some $5 billion. Boeing alleged that the planes had been sold for “absurdly low prices.”

The dispute had crossed the Atlantic even before Airbus"s involvement. UK Prime Minister Theresa May said she personally lobbied President Trump to cancel the tariffs. Bombardier has a large factory in Belfast, a constituency that’s important to the conservatives, which employs 4,000 locals.

The Airbus deal is an embarrassing setback for Boeing, one analyst said.

“This is a program that has been waiting for a deus ex machina, and wow, it really got one,” Richard Aboulafia, an aerospace analyst at Teal Group, said in an interview. The deal casts Airbus as a global player while Boeing comes off as “a bit shortsighted and protectionist. It makes Boeing look like they’ve been playing tic tac toe against a chess master.”

Bombardier shares traded in Toronto climbed 15.7% on Tuesday after the deal was announced.

Trump and Canadian Prime Minister Justin Trudeau discussed the deal Monday evening in a phone call, according to a statement from Trudeau’s office that provided no details of the conversation.

Canadian Innovation Minister Navdeep Bains said the deal will face a review under the Investment Canada Act. But one unnamed government source told Bloomberg that it’s likely to be approved.

Assuming it is approved, the transaction would be expected to close in the second half of next year, at which point Airbus will own 50.01% of the C Series partnership. Bombardier will hold about 31% and the province of Quebec, which controversially invested $1 billion in the C Series after the cost overruns and delays, will own approximately 19%. Quebec will remain an investor in the C Series until at least 2023, said the province’s economy minister, Dominique Anglade.

Bombardier has rejected Boeing’s complaint, saying Boeing doesn’t have grounds to accuse Bombardier of unfair trade practices because Boeing doesn’t make a mid-sized jet comparable to the C-Series.

Unsurprisingly, Boeing criticized the deal, hinting that it could try to expand its complaint to include Airbus if the company tries to avoid the C-Series sanctions.

“This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government,” Boeing, the world’s largest aerospace company, said in an emailed statement. “Our position remains that everyone should play by the same rules for free and fair trade to work.”

Of course, Airbus and Boeing are each other"s primary rival. By acquiring the ownership stake in the C-Series, Airbus is killing two birds with one stone. Embarassing and threatening Boeing, while acquiring new technology for cheap that could allow it to cater to a new kind of customer: Chinese airlines looking for more fuel-efficient planes.