Boeing seeks to “derisk” China, remarket aircraft to other airlines
China remains a headache for Boeing. The US aerospace giant is taking steps to “derisk” its business there and is in talks with airlines to market 737 MAX jets that were originally detained for Chinese carriers.
Regulators in China have not yet approved the return to service of the 737 MAX, and rival aircraft manufacturer Airbus has in recent months booked orders for over 300 aircraft from major Chinese carriers. There are also geopolitical tensions between the United States and China.
“We still would like to deliver airplanes to China,” chief executive Dave Calhoun told analysts on a call after the group published third-quarter results on October 27, 2022.
He noted COVID restrictions in China have reduced demand for aircraft. “We hope that is what is restricting the acceptance of our airplanes that they have on our tarmacs. But we also are clear eyed about the geopolitical risks that are out there, and we are not going to impart new risks on our investors, and we believe we can derisk what we have.”
Boeing said it ended the third quarter with 270 MAX aircraft in its inventory, down 20 compared to the second quarter. Of those, 138 are for customers in China.
Calhoun said Boeing was in active discussions with customers over remarketing those aircraft, even though he would rather just deliver them to China.
“We have begun and we're going to continue to remarket these airplanes as we move forward, and we're confident that there's a market for it, not a little market but a big market,” Calhoun revealed.
“I'd prefer to just reinstate deliveries with our China customers. But anyway, that's the course we're on. It hasn't really changed much. But it is really hard for me to find signals that things are going to change in China and move in our direction.”
What about 737 MAX 7 certification?
Boeing is currently in a race against time to get the smallest version of its narrowbody, the 737 MAX 7, certified.
If Boeing fails to get the MAX 7 and the larger MAX 10 approved by the FAA by December 31, 2022, then it will have to equip both variants with a modernized flight crew alerting system to meet additional safety requirements, as per the new Aircraft Certification, Safety and Accountability Act (ACSAA) which will be implemented on January 1, 2023.
Calhoun said he was confident Boeing would get across the finish line. “As everybody knows, we are up against a deadline here at the end of the year. We remain confident that we can get an extension of that deadline because this is the safe answer.”
Meanwhile, supply chain problems and notably a shortage of engines is also hampering 737 MAX production.
Chief financial officer Brian West said Boeing delivered 88 aircraft in the quarter, below its previous expectations. The company now expects to deliver 375 737 airplanes this year, down from a previous estimate for “low 400s”.
Overall, Boeing reported a third quarter net loss of $3.3 billion, reflecting losses on defense programs. Revenue, however, was up 4% to $15.96 billion, helped by resumption of 787 deliveries.
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