Boeing 737 MAX to Resume Deliveries in China

After a long hiatus, the Boeing 737 MAX is set to make a comeback in China. Chinese airlines are preparing to receive the jets once again, bringing some positive news for the stock as we enter 2024.

According to Deutsche Bank analyst Scott Deuschle, public flight tracking data indicates that a pre-delivery flight for China Southern Airlines’ 737 MAX is currently underway. This development is seen as a promising sign for Boeing, suggesting that the delivery of these aircraft to China may resume in the near future.

Boeing is yet to comment on the flight and its implications.

Since March 2019, Chinese airlines have not received any deliveries of the MAX. However, ICBC Leasing, a subsidiary of a Chinese bank, did receive a few MAX jets in 2021 and 2022. Unfortunately, it is unclear which airlines these planes were allocated to, as ICBC serves both domestic Chinese and international carriers.

The resumption of MAX deliveries to China would mark another step toward the recovery and normalization of the Chinese aviation industry following the effects of the COVID-19 pandemic. Lockdown measures implemented in 2022 significantly impacted domestic air travel demand in China. However, air traffic has been steadily recovering throughout 2023. In fact, October’s data from the International Air Transport Association reveals a remarkable 90% year-over-year increase in domestic air travel within the Asian-Pacific region.

This potential revival of MAX deliveries in China not only serves as an encouraging development for Boeing but also underscores the recovery of the broader global air travel industry.

Global Air Travel Recovery

Global air travel is steadily recovering, currently operating at 98% of pre-COVID levels. However, China’s slower recovery has posed challenges for Boeing in recent years. After two deadly crashes, the Boeing MAX aircraft was grounded worldwide from March 2019 until November 2020. Although most airlines reintroduced the MAX in late 2020 or early 2021 following recertification by global aviation regulators, China took a more cautious approach.

Chinese airlines resumed flying the MAX with a Mongolian Airlines flight into China in October 2022, while domestic airlines started operating the aircraft in January 2023. While deliveries to China would be a positive development for Boeing, it has yet to impact the company’s stock. On Wednesday, Boeing’s shares closed down 1.2% at $260.25, while the S&P 500 and Dow Jones Industrial Average fell 1.5% and 1.3% respectively.

Despite this, Boeing’s stock has seen a strong month, resulting in a year-to-date gain of approximately 37%. Investors are increasingly optimistic about the recovery of air traffic and its positive implications for Boeing’s earnings and free cash flow in the coming years. Analyst Deuschle shares this optimism, as he rates Boeing shares as a Buy with a target price of $320.

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