https://www.barrons.com/amp/articles/bo ... 1666096947
Boeing Might Put 737 MAX Jets on Sale, Report Says. China Approved a Competitive Plane.
Oct. 18, 2022, By Al Root,
allen.root@dowjones.com
Jet manufacturers don't typically offer planes in clearance sales. But Boeing could do just that with some 737 MAX jets originally bound for Chinese customers.
Boeing (ticker: BA) built and parked hundreds of 737 MAX jets while the plane was grounded worldwide between March 2019 and November 2020. The company has been working down that inventory since the 737 MAX was recertified for commercial service almost two years ago.
China was one of the final countries to recertify the MAX. And Chinese airlines haven't taken direct delivery of a 737 MAX jet since early 2019. With roughly one-quarter of all MAX orders ultimately destined for China, the situation creates an uncomfortable inventory bulge for Boeing.
As a result, the commercial aerospace giant might end up selling some of the planes originally destined for China to Indian airlines and aircraft lessors, according to Bloomberg.
Boeing declined to comment on planned sales. Recent filings and comments made by CFO Brian West on Sept. 15 indicate that Boeing has been remarketing some planes as needed for many months. Just how many jets have been remarketed, or sold to buyers other than the original customers, isn't known.
Selling the planes out of inventory would generate needed cash for the airline. Boeing has burned through billions of dollars in cash because of the dual problems of the MAX grounding and Covid-19. Net debt at the company has risen to roughly $43 billion from about $5 billion at the end of 2018, a few months before the second of two crashes of the plane within five months led to its grounding.
But redirecting jets built for one customer to another isn't typical practice in the industry. It might allow the Chinese airlines that haven't taken MAX jets recently to exit or delay their commitments to buy them.
The potential move from Boeing comes as Chinese airlines start taking delivery of China's first 737-size aircraft built by a local company: Comac. The C919 was recently approved by Chinese aviation authorities and the first jets are set to be delivered to China Eastern Airlines.
The new plane is designed to challenge the 737 and A320 family of aircraft. There are almost 600 C919 jets on order, compared with closer to 10,000 undelivered A320 and 737 orders, so the risk to Airbus and Boeing looks small. Still, investors are sensitive to anything that could go wrong for Boeing these days.
Boeing shares, after all, are down almost 70% from their record high of more than $440. The stock is down about 32% so far this year, while the S&P 500 and Dow Jones Industrial Average are off about 23% and 17%, respectively.