[SEOUL/PARIS] Boeing is looking to resell potentially dozens of planes locked out of China by tariffs after repatriating a third jet to the US rather than store it without willing buyers. The move to prevent a repeat of the costly build-up of undelivered jets seen during past fluctuations in Chinese imports comes as the planemaker redoubles efforts to save cash and pay off debt by selling off part of its services business.
Boeing took the rare step of publicly flagging the potential aircraft sale during an analyst call on Wednesday (Apr 23), saying there would be no shortage of buyers in a tight jet market.
“Customers are calling, asking for additional airplanes,” CFO Brian West said. Such negotiations are usually kept tightly under wraps. “Due to the tariffs, many of our customers in China have indicated that they will not take delivery,” CEO Kelly Ortberg said during the call.
Industry sources said the comments were seen as a message to Beijing and Washington that the tariff war between the world’s two largest economies was set to impose a heavy cost as airlines try to renew fleets and Boeing recovers from internal crises.
US President Donald Trump this month raised baseline tariffs on Chinese imports to 145 per cent. In retaliation, China imposed a 125 per cent tariff on US goods.
However, West cautioned that things could change quickly. Washington signalled openness to de-escalating the trade war this week, stating that high tariffs between the US and China are not sustainable.
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Potential new customers include India or other fast-growing markets like Latin America and South-east Asia but discussions have barely begun, industry sources said.
But finding new customers after planes have been built “can be a costly endeavour”, industry publication Leeham News warned.
Experts say many components, such as cabins, are picked by airlines and switching to a new configuration can cost millions of US dollars. Doing so may also create a tangle of contractual commitments and need the co-operation of the original buyer.
Ortberg said China was the only country where Boeing was facing this issue.
“We’re not going to continue to build aircraft for customers who will not take them,” Ortberg said.
Return trip
Boeing’s public stand follows a threat from tariffs to the aerospace industry’s decade-old duty-free trading status.
Senior industry officials say, however, there is no clear evidence of a reported official Chinese government ban on US jets. The move to repatriate and re-market jets stands in contrast to a build-up seen during an almost five-year import freeze on 737 MAX jets into China and previous trade tensions. Two jets that had been ferried to China in March for delivery to Xiamen Airlines returned to Boeing’s production hub in Seattle in the past week.
A third 737 MAX flew from Boeing’s Zhoushan completion centre near Shanghai to the US territory of Guam on Thursday, Flightradar24 data showed.
Guam is one of the stops Boeing delivery flights make on the 8,000-km journey across the Pacific.
The third plane was initially built for Air China, according to Aviation Flights Group. The flag carrier did not respond to a request for comment. It had been ferried from Seattle on Apr 5, in the period between Trump first announcing tariffs on China and Beijing starting to enforce its own ramped-up tariffs on US goods.
Boeing says China represents around 10 per cent of its backlog of commercial planes. It has been losing market share to rival European planemaker Airbus in recent years.
Boeing had planned to deliver around 50 new planes to China over the rest of the year, West said. It is studying options for re-marketing 41 already built or in production.
Hovering in the background is Airbus, though it is unclear how the US-China rift might affect Boeing’s arch-rival.
Airbus has been in on-off negotiations for at least a year to try to grab a huge order of up to 500 jets, though China tends to tread carefully over all major purchase decisions during times of geopolitical uncertainty, industry sources said.
Airbus said it never comments on commercial discussions that may or may not be happening. REUTERS
