Boeing Gets a China Boost. 737 MAX Deliveries Are Closer to Restarting.

“Based on our review of public flight tracking data, a 737 MAX pre-delivery flight appears to be underway for
China Southern Airlines,
” wrote Deutsche Bank analyst Scott Deuschle in a Wednesday report. “We view this flight as an incremental positive for Boeing, as it is suggestive of a higher probability that deliveries of 737 MAX aircraft into China could resume in the coming months.”

Boeing didn’t immediately respond to a request for comment about the flight.

The MAX hasn’t been delivered to a Chinese airline since March 2019.
ICBC
Leasing, which is owned by a Chinese bank, took delivery of a handful of MAX jets in 2021 and 2022, but it is hard to know where those planes ended up. ICBC serves both domestic Chinese and foreign airlines, according to its website.

Deliveries of MAX jets to China would be another sign of postpandemic normalization for the Chinese aviation business, as well as the global air travel industry.

China’s zero-Covid lockdowns in 2022 roiled its domestic market, eliminating the need for Chinese airlines to add jets to their fleets. Air traffic has been recovering throughout 2023. Domestic air travel within the Asian-Pacific region was up 90% year over year in October, according to the most recent data available from the International Air Transport Association.

Overall, global air travel is at 98% of pre-COVID levels.

The slower recovery in China has been a headache for Boeing in recent years. The MAX was grounded worldwide between March 2019 and November 2020 following two deadly crashes. While most airlines reintroduced the MAX in late 2020 or early 2021 after the plane was recertified by global aviation regulators, China waited.

The MAX didn’t fly again in China until a Mongolian Airlines flight into China in October 2022. Domestic airlines didn’t start flying the MAX until January 2023.

Deliveries to China would be a good thing, but the prospect hasn’t moved Boeing stock yet. Shares closed down 1.2% at $260.25 on Wednesday, while the
S&P 500
and
Dow Jones Industrial Average
fell 1.5% and 1.3%, respectively.

Boeing stock has had a strong month, bringing its gain so far this year to about 37%. Investors have been feeling better about the recovery of air traffic and what that means for Boeing’s earnings and free cash flow in the years ahead.

Deuschle is optimistic too. He rates shares Buy and has a target of $320 for the price.

Overall, about 80% of analysts covering Boeing stock rate shares Buy, while the average target for the price is about $268. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

Write to Al Root at [email protected]