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Boeing Looks To China As It Works To Deliver Stored 737 MAX Jets

Jan 29,2022

Boeing has expressed optimism about its 737 MAX program as it kicks off 2022. The American aircraft manufacturer feels buoyed by recent approvals and moves to lift the MAX grounding in key geographies, but especially in China. One of the big benefits for the manufacturer there is, as the aircraft re-enter service, it will be able to clear more of its stored MAX jets and, potentially, sell more of the type in China.

Boeing looks at China with optimism
Boeing¡¯s CEO, Dave Calhoun, provided a broad overview of Boeing¡¯s outlook on the company¡¯s fourth-quarter earnings call on Wednesday. Speaking on various aspects of the business, he commented on the return to service of the MAX:

¡°We have regulatory approval now in almost every jurisdiction in the world¡­China, Indonesia and Ethiopia all delivered prior to the end of the year. We delivered 245 airplanes in ¡¯21. We flown safely over 800,000 flight hours [with a] 99.3% service reliability. We¡¯ve now flown more [hours] post the MAXgrounding than we did pre-MAX grounding. China is preparing for their MAX return to service and for delivery, and we have set up a plan that allows for that in the first quarter.¡±

Mr. Calhoun further clarified that Boeing would follow the lead of China¡¯s aviation regulators and Chinese carriers to support a methodical return to service. However, Boeing is still optimistic that the environment in China is improving, and the MAX grounding, of which China was one of the first countries to impose, is coming to an end.

Deliveries to China are expected to resume soon
Boeing is currently anticipating a first-quarter deliveries resumption in China, which ends on March 31st, 2022. The manufacturer did not give a firm date to when it expects to deliver the first MAX jet to a customer, though there are plenty of jets waiting to be delivered. Boeing¡¯s Chief Financial Officer, Brian West, stated the following on delivery plans surrounding the MAX:

¡°We currently have 335 737 MAX airplanes in inventory and still anticipate delivering most of these airplanes by the end of 2023. Timing and pace of deliveries to Chinese customers are also critical assumptions to our delivery outlook.¡±

China¡¯s airlines were, pre-crisis, very hungry for airplanes as they sought to expand and further develop the country¡¯s growing appetite for air travel. However, the global health crisis has put a pin in much of that expansion, and China¡¯s closed borders mean most traffic remains domestic, though still relatively muted.As China looks to ramp up its expansion of air infrastructure and resume more air travel over the next couple of years, it should help restore some of that pre-crisis appetite for new planes. This should be a tailwind for Boeing as airlines look to have aircraft available to power that growth.

Boeing¡¯s MAX resurgence
Boeing has already been able to resume MAX deliveries to most of its major customers. Since the groundings started to lift in late 2020, American Airlines, United Airlines, Southwest Airlines, Alaska Airlines, Ryanair, Icelandair, and Copa Airlines are just some of the wide variety of airlines that received new MAX aircraft. However, the grounding has stretched in China, which has limited Boeing¡¯s ability to resume deliveries.

The 737 MAX made quite a resurgence in 2021. Several airlines have placed blockbuster orders for the aircraft and are looking to use the planes to renew their fleet, expand, and capitalize on the improved fuel efficiency of the MAX in comparison to older models.

Boeing has largely had room to grow in China. The big three major Chinese carriers all have the MAX in their fleet plans, as do some smaller airlines looking to grow. However, Boeing¡¯s sales of the MAX in China are far less compared to the aircraft¡¯s sales in places like the United States and Europe.

Once deliveries of the MAX resume and airlines in China start flying them and get back to profitability, Boeing will likely be in the running for aircraft orders. The manufacturer already has a history with these carriers, which fly a host of other Boeing jets, including 747s, 777s, and 737s. Just how many orders Boeing brings in from China remains to be seen, though getting MAX planes delivered and the type back in the air there remains one of the big steps before any orders come in.


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