Boeing readies 737 Max deliveries to China after 4-year halt

Boeing Co. is preparing to restart delivery of 737 Max jets to China for the first time in four years, according to people familiar with the matter, a long-awaited breakthrough that would bolster the planemaker’s comeback from one of the worst crises in its history.

The initial handovers are expected to take place within weeks, said the people, who asked not to be named discussing confidential matters. 

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

China Southern Airlines Co., the country’s largest carrier, is poised to take the first 737 Max from Boeing, according to one of the people. Officials for China Southern didn’t response to requests for comment. 

The carrier led the way in resuming commercial Max flights earlier this year after Chinese 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 prior to the tragedies have been returned to service.

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

“We continue to support our customers in China, with more than 95% of their current 737 MAX fleet in service,” the company said in a statement. “For deliveries, 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 extending in 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 Officer Dave Calhoun’s effort to restore profitability. 

The people cautioned that a diplomatic snag could still derail the resumption of 737 Max deliveries. A series of US officials have visited China in recent months and come back empty-handed. 

Commerce Secretary Gina Raimondo is set to visit China on Sunday to promote US business interests, though the delivery restart isn’t expected to coincide with her trip, according to the people. 

The exact timing of the initial delivery to China is still being finalized 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.

On the Move

Boeing has 85 undelivered 737 Max jets designated for China in storage, and has found buyers for another 55 aircraft that were originally built for Chinese customers, 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 slated 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 Aug. 16, one of the planes was flown from Boeing’s 737 factories in Renton, Washington, to a facility in California’s Mojave desert where it is being repainted. That is often one of the final steps prior to delivery by Boeing, according to Jean-Pierre Picchiottino of Aero Analysis Partners. 

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

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The workhorse jetliner is Boeing’s main source of cash as it rebuilds finances devastated by Covid and a global Max grounding. Rival Airbus SE has built a commanding lead in China, and around the globe, 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’s always the risk of political rhetoric or military brinksmanship undermining commerce with the biggest US exporter.

--With assistance from Ocean Hou and Eric Johnson.