'If they're flying, they're buying': Boeing (BA) 737 MAX returns to service in China

According to the flight tracking website FlightRadar24, a China Southern Airlines flight on a Boeing (NYSE: BA) 737 MAX took off on Friday. This marks the first passenger commercial service on the 737 MAX by a Chinese airline in nearly 4 years.

The 737 MAX, Boeing’s best-selling aircraft, gained U.S. Federal Aviation Administration (FAA) certification in March 2017. However, two plane crashes in Indonesia and Ethiopia that took place in 2018 and 2019 paved the way China's aviation regulator becoming the first in the world to ground the MAX.

The U.S. Federal Aviation Administration (FAA) also grounded the 737 MAX in March 2019 before removing the grounding order in November 2020.

Returning to China was always one of Boeing’s top priorities. For Wolfe Research analyst Myles Walton, it was about “when” and not “if.”

“That “when” certainly took longer than we would have thought a year ago and was delayed in part by zero-covid policies that stalled the need for the capacity. China airline schedules have been holding toward a robust bounce back in 1Q23 making the need for capacity more clear. That capacity need is going to have to be, at least in part, fulfilled by Boeing aircraft,” Walton said in a client note.

The analyst adds that investors may beat the company’s management in recognizing the China upside potential.

“Boeing’s $10B targeted FCF in 2025/26 was signaled to be excluding China. Optimism on incremental China demand returning likely won’t prompt management to change their outlook near-term, but it won’t stop the market from gaining upside optimism to the $10B. This is particularly the case as long only positioning remains offsides on the name and buyers are searching for an incremental reason to buy with the stock up 70% since the Fall,” Walton added.

Boeing stock is down over 1% in pre-market Friday.

By Senad Karaahmetovic

You May Also Be Interested In

• White House plans to meet with defense firms to discuss weapons production - Reuters
• India delays final report on Air India 787 crash investigation
• Oxford Industries (OXM) PT Lowered to $40 at UBS Amid Top-line Weakness