Analysis: Crash in East China could halt Boeing recovery in China with MAX return

FILE PHOTO: A Boeing 737 Max aircraft model is on display at the China Airshow or Airshow China International Exhibition in Zhuhai, Guangdong Province, China on September 28, 2021. REUTERS / Aly Song / Stock Photo

March 22, 2022

By Jamie Freed and Eric M. Johnson

(Reuters) – The deadly crash of a China Eastern Airlines 737-800 could halt Boeing’s efforts to regain ground in the world’s largest aircraft market and deliver more than 140,737 MAX jets already built for Chinese customers.

The 737-800 that crashed on Monday does not have the equipment that led to the 737 MAX crashes more than three years ago, but that may not make a difference for Chinese passengers and a national regulator known for meticulous safety requirements. .

China Eastern said the cause of the crash was under investigation. Such accidents usually involve many factors and experts have warned that it was too early to draw conclusions about the possible causes, especially in light of the scarce information available.

China was the first country to jam the 737 MAX after fatal crashes in Indonesia and Ethiopia more than three years ago, and is the only major market where the MAX has not resumed commercial flights.

A 737 MAX built for China’s eastern subsidiary Shanghai Airlines took off from Seattle for the Boeing completion plant in Zhoushan last week, industry sources said, signaling a return to service in China was imminent.

The plane landed in Guam on March 15 as part of a multi-legged journey and has not moved weekly since, according to flight tracking website FlightRadar24. Boeing declined to comment.

Colin Scarola, a senior stock analyst at CFRA Research, said he would not be surprised if the crash further delayed MAX’s return to China, where aviation regulator is known for its meticulous safety.

Chinese airlines do not need new MAXs because demand is falling after the country’s biggest COVID-19 cases in two years, industry sources said. However, the US manufacturer has more than 140 MAX jets already built for Chinese customers waiting to be delivered as soon as the jet returns to commercial service there, said a person familiar with the matter.

Shares of Boeing closed down 3.6% on Monday.

The crashed 737-800 is an older model with a strong safety record and there are nearly 1,200 in service in China, making it the world’s largest market for the aircraft, according to aviation consultancy IBA.

More than 4,200 737-800 are in service worldwide, according to data from Cirium Airlines.

China Eastern has pinned down its fleet from 737-800, state media reported. It is the sixth largest airline in the country with 89 aircraft, the IBA said, but other Chinese carriers continue to fly jets and China Eastern has not landed similar but slightly smaller 737-700s.

Jefferies analysts say China’s aviation regulator is unlikely to shut down the 737-800 fleet unless it explicitly suspected a technical failure as the main cause of the operational consequences of the grounding of more than 1,000 aircraft in the world’s second-largest domestic aviation market. .

However, there are concerns that the Chinese public could avoid flying 737-800 aircraft until the cause of the crash is determined, given the wider reputation problems with the 737 family caused by MAX, said Cowen analyst Cai von Rumohr in a note.

“Therefore, isolating the cause of the crash will be critical,” he added, noting that the main causes of commercial air crashes tend to be maintenance issues, pilot error or sabotage, rather than construction or design issues.

Boeing has canceled a meeting of its executives scheduled for this week in Miami to focus on research and China Eastern, a second source with knowledge told Reuters.

“We have been in close contact with our customers and regulators since the accident and have offered the full support of our technical experts in the investigation,” Boeing CEO Dave Calhoun said in a note to staff. Reuters.

(Report by Jamie Freed in Sydney and Eric M. Johnson in Seattle; additional citations by Abhijith Ganapavaram in Bengaluru, Allison Lampert in Montreal, David Shepardson in Washington and Rajesh Kumar Singh in Chicago; Edited by Peter Henderson and Leslie Adler)

Analysis: Crash in East China could halt Boeing recovery in China with MAX return

Source link Analysis: Crash in East China could halt Boeing recovery in China with MAX return

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