A little-publicized report from China's aviation regulator may hold the key to restarting Boeing's 737 MAX deliveries to China. It appears that political tensions between China and the United States may be the final hurdle that's standing between Boeing and resuming MAX deliveries to Chinese airlines.

On Friday, Reuters reported that the Civil Aviation Administration of China (CAAC) had released the second revision of its 737 MAX evaluation report. CAAC released the revision on April 14th, and although it is publicly available and seen by Reuters, it has not received widespread publicity. The recently released second revision includes updates to pilot training for the 737 MAX and other technical information on the aircraft.

Encouraging progress for Boeing

This revision would probably have been distributed to Chinese airlines, and Reuters' assessment, quoting a person familiar with the matter, is that it "conveyed the message that the regulator had reviewed the airplane and that carriers could take delivery should they want to." The sources were not authorized to speak publicly about the matter and so declined to be named.

At Boeing's annual meeting last week, CEO Dave Calhoun described the report as "encouraging progress" and "an important step" for enabling future deliveries. Recognizing that the Chinese airlines accept the aircraft, Calhoun added that "our customers will determine the timing of when they are ready to take delivery of their airplane."

The MAX resumed flying in China in January, and Calhoun added that all Chinese MAX operators had resumed flight operations, with 45 of 95 MAX jets now back in service. Deliveries of the 737 MAX to China were suspended following the deadly crashes of the Lion Air and Ethiopian Airlines airplanes in 2018/2019.

Which airlines want the MAX delivered?

Boeing believes the report released this month is the final technical requirement for restarting MAX deliveries, although Reuters said that the "US-China trade tensions could still stall progress." There are around 130 MAX jets ready to be delivered, worth about $15 billion at list prices, and recent announcements from Chinese airlines suggest they are prepared to accept them.

In March, China Eastern and China Southern, both current 737 MAX operators, said they would resume taking deliveries of MAX planes this year. Last week Hainan Airlines added to the positivity when it said it planned to take delivery of 14 MAX aircraft from lessors between 2023 and 2026. Reuters said this was the first time a Chinese carrier had announced plans to add MAXs to its fleet beyond those ordered before the fatal crashes and subsequent CAAC grounding.

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Investment analysts injected a note of caution into the report, with one saying it was still hard to say when China would begin to accept MAX deliveries and expressing the view that "it's a geopolitical question." Seth Seifman of JPMorgan added:

"If some of the administrative things that have to happen can actually happen, then that's helpful. But I've found this whole process to be extremely opaque."

Do you think Boeing will soon be able to deliver the 737 MAXs it has produced for Chinese airlines? Let us know in the comments.

Source: Reuters