Boeing is diverting some Chinese 737 Max orders to other customers

Boeing is shopping some jets earmarked for China to other buyers as the planemaker grapples with trade tensions that have stalled 737 Max deliveries to its largest overseas market.

The shift affects a “small number” of jets, Chief Executive Officer Dave Calhoun told reporters at an industry event Thursday in Washington. Executives said they didn’t undertake the decision lightly, especially given the importance of the Chinese market and Boeing’s half-century-long relationship with airlines there.

But he signaled Boeing is anxious to unlock the cash tied up in jets that have been sitting on its property for years. “You’ve got to move them,” Calhoun said. “You can’t wait forever and there’s a big market.”

The move highlights the aircraft manufacturer’s dilemma amid an extended US-China trade stalemate, particularly at a time when it faces surging demand for its top-selling jetliner program and needs cash flow. It risks irking an important customer and losing out longer-term in the Chinese market to arch-rival Airbus SE, said George Ferguson, analyst with Bloomberg Intelligence.

“It won’t be a duopoly if the Chinese decide they’re just going to go Airbus,” he said in an interview prior to Calhoun’s comments.

Boeing’s CEO did not specify which airline’s jet orders would be impacted. Calhoun earlier this year indicated Boeing sought to limit fallout from exposure to China, which hasn’t taken any 737 Max deliveries since early 2019.

The planemaker had already begun to find other takers for Max production slots reserved for Chinese buyers this year and it’s faced some cancellations as airlines in that market grapple with Covid lockdowns. Okay Airways Co. scrapped orders for two Max in August.

Balance Sheet Concerns
Clearing hundreds of already-built 737 and 787 Dreamliners from company storage lots is critical to refurbishing Boeing’s debt-laden balance sheet. The planemaker has about $5 billion in cash tied up in the 140 or so Max destined for China, Ferguson said.

Supplier delays and labor shortages are also hampering output of the 737 Max, which is working its way back from a prolonged grounding following a pair of deadly crashes at the same time that Airbus is fortifying its lead in the narrowbody market.

In a separate presentation Thursday, Chief Financial Officer Brian West said Boeing’s full-year delivery target for the 737 Max was at risk, citing tepid shipments in July and August. The company didn’t formally change the forecast, which it had previously reduced in July to the “low 400s” for the year.

Ramping up output of Boeing’s cash-cow 737 jetliner family is critical to the executives’ efforts to turn around the planemaker and pay down its $57 billion in debt after years of turmoil.

Boeing has sufficient liquidity and remains on track to deliver positive free cash flow this year, West said. The planemaker last accomplished that feat in 2018.

Boeing shares reversed earlier losses and traded up 0.3% as of 3:23 p.m. in New York. The stock had declined 26% this year through the close of Wednesday’s session. bloomberg.com