Boeing expects China’s civil aviation authority to certify the 737 Max for return to service in that country by the end of the year, an eventuality that will allow its plan to increase production rates from 16 to 31 in early 2022. Although the Civil Aviation Administration of China’s approval by year-end remains an assumption, Boeing CEO David Calhoun reported during the company’s second-quarter earnings call on Wednesday that he feels confident in the projection given the feedback he has received from Chinese authorities.
Calhoun did concede, however, that political risks remain a consideration, if not a worry. “I don’t want to imply that anything is risk-free on this front,” said Calhoun. “It’s not. It never will be, especially when it relates to China relations, which are real.” However, he noted China’s need, for example, for the Max to support its post-Covid traffic growth and the 2022 winter Olympic games in Beijing as factors that point toward a positive prospect for the airplane’s certification by year-end. Meanwhile, some 100 Max jets already delivered to China remain on the ground not generating revenue, so the country’s airlines continue to see only negative effects from a more protracted process of certification.
“There is nothing that prevents this trade [between the U.S. and China] from happening,” added Calhoun. “Our government fully understands and appreciates the fact that our industry is a leader in the world and that leadership in China is critical to that and the employment that it, of course, holds…and things have been constructive.”
Still carrying some 390 Max jets in inventory, Boeing expects to deliver about half of the 450 in storage pre-grounding by the end of this year, then the rest through 2022, noted interim CFO David Dohnalek. So even though Boeing produces just 16 Maxes per month, its actual delivery rate runs far higher and Calhoun estimated it would reach about 50 by the end of the year.
“We have de-risked our year largely for China,” he explained. “So they become next year’s risk with respect to deliveries. So we’ll run that play and that ramp as hard as we can and we’ll have signals with respect to where China is well before that, and if we have to make adjustments we will.”