On Thursday, Boeing (BA) executives said they would find new customers for certain Boeing 737 Max planes built for Chinese airlines. The max planes could not be delivered because Chinas aviation regulator had not certified the plane to fly following two fatal disasters.
The executives expect that the action will improve Boeing stock (NYSE:BAC) and reduce the log of unsold Max airplanes, which accumulated while the planes were grounded worldwide.
However, the move risks escalating tensions between Boeing (BA) and China, formerly Boeings largest market for the Max. According to company executives, as of June 30, Arlington, Virginia-based Boeing had 290 unsold 737s in inventory, with almost half destined for China. The corporation did not say how many were resold to new purchasers.
Last December, Chinas aviation authority took a significant step toward allowing airlines to resume using the Max. Chinese airlines conducted flying testing in February. However, the Chinese Civil Aviation Administration has yet to complete the final procedures to allow Max flights and deliveries to restart, which Boeing executives attribute to COVID-19 lockdowns.
Meanwhile, the companys patience was wearing short.
Weve been putting off decisions on those planes for a long time. We cant postpone that choice indefinitely, Boeing Chief Financial Officer Brian West said on Thursday. As a result, we will begin to re-market some of those planes we previously reserved for our Chinese clients.
China is a key market, and Boeing did not make a choice lightly, according to West, who spoke at a Morgan Stanley investment conference. However, he expressed optimism that Boeing will find new customers for the jets, which have a list price of $100 million or more – though airlines sometimes receive huge discounts.
China is the last major market where the Max has yet to be approved for flight. The Federal Aviation Administration authorized the adjustments made by Boeing to the jet in late 2020, and authorities in Europe, Canada, and Brazil have followed suit.
Boeings reliance on the Chinese market was emphasized in July when Chinas three major airlines purchased almost 300 jets from European competitor Airbus.
Relations between the United States and China were strained under the administration of former President Donald Trump, who conducted a trade war with China. ON THURSDAY, Boeing CEO David Calhoun said that open trade with China has benefited the industry but that recent geopolitical developments may slow us down.
I believe we will return someday, Calhoun stated at a US Chamber of Commerce event. I simply dont think itll be any time soon. Boeing stock rose on Thursday as CEO Dave Calhoun suggested that the aerospace companys 737 Max jet might still be certified this year.
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Author: Okoro Chinedu
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