Boeing ready to resell China-bound jets if trade war worsens

Straits Times

24-04-2025

SEATTLE – Boeing is prepared to find alternative buyers for China-bound aircraft that are mired in a trade dispute with the United States, as the planemaker seeks to reduce the fallout on its jet deliveries and earnings recovery.
China has stopped taking deliveries from Boeing, chief executive Kelly Ortberg confirmed in an interview with CNBC on April 23, after the company reported better-than-expected results. The move, first reported last week by Bloomberg News, has left in doubt the fate of about 50 jets that were slated to go to the country in 2025.
'We are in close communication with our China customers and we are actively assessing options for remarketing already built or in-process airplanes,' Mr Ortberg said during Boeing's earnings call.
The impasse underscores the tough situation that Boeing faces as the largest US exporter of manufactured goods after President Donald Trump unveiled tariffs with most of America's trading partners. So far, only China has retaliated with tariffs that have priced Boeing jets out of the market for the country's carriers.
Mr Ortberg conceded that the turnaround under way at Boeing could become rocky if more nations were to follow suit. Echoing comments by General Electric chief executive Larry Culp this week, the Boeing chief said he and his staff have stressed to the Trump administration the importance of aerospace exports to the US economy.
'I don't think a day goes by where we aren't engaged with someone in the administration, including Cabinets, secretaries and up to POTUS himself,' Mr Ortberg said, using the acronym for President of the United States.
For now, the fallout is manageable for Boeing, which is able to offset any cost increases its pays for higher goods and services on jets that are exported. Executives pegged the planemaker's exposure at less than US$500 million (S$657 million), with the planes bound for China putting another US$1 billion or so of revenue in jeopardy.
But the continued strong demand for new jetliners, combined with delivery constraints at rival Airbus, should work in Boeing's favour.
Among airlines that are willing recipients of the aircraft rejected by China is Air India. Through the end of March, the airline had accepted 41 737 Max jets originally built for Chinese airlines, and the carrier has signalled that it is eager to take more, Bloomberg reported this week.
'Looking ahead, if China decides to defer or cancel orders, Boeing should have little difficulty reallocating the aircraft to other airlines that need additional capacity,' Mr Ron Epstein, an analyst at Bank of America, said in a note to clients.
The possible tariff fallout has cast a pall on an otherwise upbeat recent performance by Boeing, highlighted in the first-quarter report that showed improvements on earnings and cash consumption.
Another possible negative outcome from the trade dispute is the effect it will have on suppliers, particularly smaller shops already struggling to absorb higher costs from Boeing's planned rate increases.
Mr Ortberg said the company is keeping a close eye on parts makers but has not detected any weakness yet, as it prepares to raise output of its 737 Max and 787 models in coming months.
Boeing is already working on plans to reach a monthly cadence of in the mid-50s for its 737 Max aircraft, Mr Ortberg said. For now, the company wants to get to a 38-unit monthly cap instilled by the Federal Aviation Administration, before eventually moving up to 42 and beyond, provided that the metrics that measure the health of its factories and suppliers remain stable.
The rate increases will help improve cash flow, with Mr Ortberg reiterating that Boeing aims to reverse the drain in the first half into cash generation in the latter part of 2025.
'We are well on track for that recovery to return to positive cash flow in the second half of the year,' he said. BLOOMBERG
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