A Chinese Disaster for Boeing?

Let no one accuse the Chinese of being overly hasty. For nearly four years, newspapers have been filled with stories of the incessant delays, production snafus, and general mismanagement of Boeing's (NYSE: BA  ) 787 airplane program. This year, however, Boeing has managed to put together a string of positive press releases on the Dreamliner. Successful test flights. Successful receipt of FAA certification. Successful production of the first plane for United Continental (NYSE: UAL  ) . Successful delivery of the first Dreamliner ... ever.

China's response? It just canceled an order for two dozen 787s ... because of production delays.

Quick draw, McGraw
Specifically, China Eastern Airlines (NYSE: CEA  ) , the nation's second-largest after China Southern, announced Monday that it will:

• cancel its order for 24 of Boeing's Dreamliners.
• "Replace" this order with another one for 45 of Boeing's 737 single-aisle jets.
• Simultaneously trade in five Airbus A340s to Boeing's rival, receiving 15 smaller A330s in exchange.

So this is a bit more complicated than a straight "China doesn't want your airplanes" story. I mean, yes, Boeing lost $3.3 billion in sales (at circa 2008 list prices.) But it replaced those with $3.8 billion in 737 orders (again, at list.) Yes, Boeing gave China "significant price concessions" on the 737s, but it also seems to have used these concessions to offset some penalties for delayed delivery of the 787s.

Finally, yes, China is buying some A330s from Airbus today, rather than waiting for overdue Dreamliners. But the net purchase from Airbus is only 10 planes, not 24. This tells me the airline made its decision in large part based on a changing view of its traffic volume, and not on frustration with Boeing.

Foolish takeaway
In short, this is not an unmitigated disaster. When you think about it, China Eastern's dropping its 787 order may even be good news for Boeing. It helped the planemaker land 45 smaller jet sales it might otherwise have missed out on. It moves up other customers on Boeing's delivery list, reducing the penalties Boeing might otherwise have to pay its foot-tapping patrons at AMR (NYSE: AMR  ) , Delta (NYSE: DAL  ) , and others. And if it can find the customers, Boeing's now free to resell 24 more Dreamliners at higher prices than it originally negotiated back in 2008.

Net-net, I'd say this news isn't as bad as it sounds.

Still, Boeing has now seen 50 Dreamliner cancellations this year and made no new Dreamliner sales. Can Boeing get its sales efforts back on track? Add it to your Fool Watchlist, and find out.