Geopolitical Tensions Preclude Deliveries of Popular Narrow-Body Jet

Boeing executives have disclosed their intention to begin reselling a drove of 737  MAX aircraft built for Chinese airlines. The narrow-body jets—some of which have been in storage for more than three-years—were summarily refused by the Chinese Communist government following the worldwide grounding of the 737 MAX fleet, protracted COVID restrictions, and geopolitical tensions exacerbated by U.S. Speaker of the House Nancy Pelosi’s August trip to Taiwan.

In separate statements, Boeing CEO Dave Calhoun and CFO Brian West professed they can no longer wait for China’s government to accept the long-languishing jets.

Speaking at a Morgan Stanley conference in California, Mr. West asserted: "We have deferred decisions on those planes for a long time. We can't defer that decision forever. So we will begin to remarket some of those airplanes that were otherwise earmarked for our Chinese customers."

Echoing his underling’s sentiments at the U.S. Chamber of Commerce Aerospace Summit in Washington, D.C., Calhoun remarked: "I think we'll get back [into China] someday. I just don't think it's a day soon." Calhoun went on to explain that the resale of the 737 MAX aircraft will be conducted slowly and deliberately for purpose of protecting Chinese airlines from the conceivable rashness of their own government.

That Boeing esteems its Chinese customers is made clear by Mr. West, who states: "These customers are incredibly important. We're celebrating fifty-years in China. It's an important market. But we've deferred this decision long, and now we have to think about investors."

West’s allusion to Boeing investors evinces worrying cash-flow deficits engendered by a glut of unclaimed aircraft. At the end of June 2022, Boeing ramps across the Puget Sound area sagged under the collective weight of undelivered 737 MAX and 787 Dreamliners—the latter having been deemed unfit for customer delivery by the FAA following the discovery of extensive manufacturing defects in the aircraft’s fuselages and electrical systems.

In a note to investors, financial analyst Ken Herbert of RBC Capital Markets wrote: "The risks around timing of Max deliveries into China are now largely geo-political."

Calhoun and West allege Boeing has customers eager to accept the parked 737 MAX airplanes in the steads of the Chinese air-carriers by which they were originally ordered.

"The good news is we've got confidence and conviction that we can remarket [the MAXes],” West declared.

West further indicated that Boeing stands ready to work with Chinese airlines in the event the Chinese government authorizes acceptance of the idle airliners. In such an event, the carriers would be obligated to update their pilot training and adjust their capacities to accommodate for the aircrafts’ arrivals and entries into service.

"We've just got to work through it when the regulator and the customer are ready," West posited. "We stand ready."

FMI: www.boeing.com