Market Analysis

Boeing Faces Delivery Setback as Chinese Customers Reject New Jets

Mellissa · 3d25.8K Views

Image Credit: Yahoo!Finance

Boeing (BA) has confirmed that its Chinese customers are refusing to accept deliveries of newly built planes due to tariffs, with a third Boeing jet on its way back to the U.S. as of Thursday.

CEO Kelly Ortberg stated during a first-quarter earnings call on Wednesday that China is the only country facing this issue, as the U.S. planemaker adjusts by redirecting jets to other customers in need of earlier deliveries, amid a global shortage of commercial aircraft.

Previously, under a 1979 civil aviation agreement, commercial jets could be traded duty-free worldwide. However, with President Donald Trump’s global trade initiatives, Chinese airlines now face significant retaliatory tariffs on U.S. products, making the purchase of new Boeing jets less financially viable. A 737 MAX is valued at approximately $55 million.

Two 737 MAX 8s that were set for delivery to Xiamen Airlines in March have already been returned to Boeing’s production hub in Seattle, while a third, initially built for Air China, was sent from Boeing's Zhoushan completion center near Shanghai to Guam this Thursday, according to flight tracking data.

Boeing CFO Brian West noted that China accounts for about 10% of Boeing's commercial aircraft backlog, with 50 deliveries to China planned for the remainder of the year. However, due to the tariff issue, Boeing is considering options to re-market the 41 aircraft that are either already built or in production. For the nine planes still in the production pipeline, Boeing is in discussions with customers to determine their intentions.

Boeing has already halted further construction for customers unwilling to accept deliveries and is prepared to reassign the planes to other buyers if necessary. There are currently 36 aircraft built for Chinese clients now in the U.S., including the three planes returned this week.

The ongoing tariff war also complicates Boeing's recovery from the nearly five-year freeze on 737 MAX imports into China. While Washington has signaled potential de-escalation of trade tensions, analysts warn that the uncertainty over fluctuating tariffs could result in further delays or deferrals in aircraft deliveries.