2023-03-31 15:00:27 ET
Boeing’s ( NYSE: BA ) 737 Max passenger jet is being flown more frequently by China's airlines, possibly giving the plane maker a chance to deliver more of the narrowbody planes to the country, analysts at Baird said Friday.
“Our latest proprietary checks show a significant step-up in Max fleet utilization as 9Air, Air China, Lucky Air, Shandong Airlines and Shenzhen Airlines commence passenger flights while 19 aircraft (20% of China Max fleet) entered service in March,” Peter Arment, analyst at Baird, said in a March 31 report.
China for almost four years had suspended commercial flights of the 737 Max after a deadly crash in the Java Sea and another in Ethiopia. The plane in January returned to the country’s skies, an important milestone for Boeing ( BA ) as the company seeks to resume deliveries of new planes to what had been one of its biggest markets before the pandemic.
“Accelerating fleet utilization supports our view of a potential resumption in 737 Max China deliveries in 2024 [and later],” according to Baird. “Overall China domestic flight activity is 20% above 2019 levels.”
China’s record number of domestic flights stands in stark contrast to international flights. Travel from the country hasn’t recovered to prepandemic levels amid amid uncertainties about its lockdown policies and geopolitical tensions with the United States. Flights from the United States to China are below the pandemic lows of 2020, according to Baird.
“Total China outbound flight activity for 1Q23 is less than 50% of 2019 levels, indicating that the China reopening theme is limited to the domestic aviation market,” the report said.
A key concern is that the breakdown in relations between China and the United States will prevent Boeing ( BA ) from delivering 737 Max planes to Chinese airlines. However, the country is unlikely to keep up with domestic demand for travel without more planes.
Boeing’s ( BA ) European rival Airbus ( OTCPK:EADSF ) ( OTCPK:EADSY ) doesn’t have the manufacturing capacity to supply China by itself. China’s efforts to create a commercial aircraft industry is likely a decade away from mass production, Baird said.
The investment bank maintained its Outperform rating on Boeing's ( BA ) stock, which has risen about 10% in the past 12 months. That gain contrasts with an 11% decline for the Standard & Poor's 500 stock index ( SP500 ).
Seeking Alpha contributor Dhierin Bechai rates Boeing ( BA ) as a Buy on its growth potential as China reopens .
For further details see:
Boeing’s 737 Max is flying more often in China, Baird says