Boeing ready to resell jets as tariffs hit China

Seoul/Paris — Boeing is looking to resell potentially dozens of jets 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 Boeing redoubles efforts to save cash and pay debt by selling part of its services business.

Boeing took the rare step of publicly flagging the potential aircraft sale during a call with analysts on Wednesday, saying there would be no shortage of buyers in a tight market. Such negotiations are usually kept under tight wraps

“Customers are calling, asking for additional airplanes,” CFO Brian West said.

“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 biggest economies is set to impose a heavy cost as airlines try to renew fleets and Boeing recovers from internal crises.

US President Donald Trump raised baseline tariffs on Chinese imports to 145% earlier this month. China retaliated by imposing a 125% tariff on US goods.

However, West cautioned that things could change quickly. Washington signalled openness to easing the trade war this week, stating that high tariffs between the US and China aren’t sustainable.

Potential new customers include India or other fast-growing markets such as Latin America and Southeast Asia, though 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 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 the 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 comes after a threat from tariffs to the aerospace industry’s decade-old duty-free trading status. Still, senior industry officials say there is no clear evidence of a reported official Chinese government ban on US jets.

The move to repatriate and remarket 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, according to Flightradar24 data.

Guam is one of the stops that Boeing delivery flights make on the 8,000km 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.

The jet had been ferried from Seattle on April 5, in the period between Trump first announcing tariffs on China and Beijing starting to enforce its increased tariffs on US goods.

Boeing says China accounts for about 10% of its backlog of commercial planes. It has been losing market share to European rival Airbus in recent years.

Boeing had planned to deliver about 50 new planes to China over the rest of the year, West said. It is studying options for remarketing 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 as many as 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