Boeing set to restart 737 Max deliveries to China

China Southern Airlines, the country’s largest carrier, is expected to take the first jets from the US plane maker

Boeing has 85 undelivered 737 Max jets designated for China in storage. AFP

Boeing is preparing to restart delivery of 737 Max jets to China after four years, sources said, bolstering the planemaker’s comeback from one of the worst crises in its history.

The initial handovers are expected to take place within weeks, the sources said.

This month, Boeing moved two of the single-aisle jets originally built for Chinese airlines out of storage. However, it was not clear until now if those planes were destined for their original buyers as Boeing has diverted some planes from inventory to other customers.

China Southern Airlines, the country’s largest carrier, is poised to take the first 737 Max from Boeing, according to one source. The airline did not comment.

The carrier led the way in resuming commercial Max flights this year after officials lifted flying restrictions in place since March 2019 in the wake of two fatal Max crashes. Since then, nearly all of the Max jets imported by China before the crashes have returned to service.

Boeing declined to comment on its interactions with China Southern. Shares of the US plane maker reversed losses following Bloomberg’s report, rising as much as 3 per cent in New York trading.

“We continue to support our customers in China, with more than 95 per cent of their current 737 Max fleet in service,” the company said in a statement. “We will be ready to deliver for our customers when that time comes.”

The 737 Max has been caught in a trade stalemate between the US and China, with the grounding continuing in the Boeing’s biggest overseas market long after much of the world cleared it for flight.

The narrowbody jet is not only one of the largest US exports, but Boeing’s main source of revenue and a critical component of chief executive Dave Calhoun’s effort to restore profitability.

The sources said that a diplomatic snag could still derail the resumption of 737 Max deliveries. US officials have visited China in recent months and gone home empty-handed.

A China Southern Airlines plane is parked at Ho Chi Minh international airport. Reuters

US Commerce Secretary Gina Raimondo is scheduled to visit China on Sunday to promote US business interests, although the delivery restart is not expected to coincide with her trip, the sources said.

The exact timing of the initial delivery to China is still being finalised and will depend on the customer’s readiness as well as potential repairs for a new manufacturing flaw that came to light this week: fastener holes drilled to the wrong shape in some Max 8 models in a structural component that helps maintain cabin pressure.

Boeing has 85 undelivered 737 Max jets designated for China in storage, and has found buyers for another 55 that were originally built for Chinese customers, Mr Calhoun said during a July earnings call.

With demand surging and no end to the diplomatic stalemate in sight, Boeing started remarketing the aircraft last year.

In recent weeks, Boeing has taken two 737 Max 8 jets scheduled for delivery to China Southern Airlines out of storage – the first such activity in many months, according to reports by Aero Analysis Partners/AIR and Bank of America.

On August 16, one of the planes was flown from Boeing’s 737 factory in Renton, Washington, to a facility in California’s Mohave Desert where it is being repainted. That is often one of the final steps before delivery by Boeing, according to Jean-Pierre Picchiottino of Aero Analysis Partners.

A second Max was sent on August 22 to Boeing Field, south of Seattle, where 737 handovers typically take place.

The workhorse jetliner is Boeing’s main source of cash as it rebuilds finances devastated by Covid and Max grounding. Rival Airbus has built a commanding lead in China, and around the world, while the 737 Max has been shut out of its largest overseas market.

Boeing officials have picked up encouraging signals from their Chinese customers in recent months about restarting deliveries and sales. But with Beijing guiding aircraft purchases, and US-China trade tensions running high, there is always the risk of political rhetoric or military brinkmanship undermining commerce with the biggest US exporter.