Boeing doesn't anticipate a trade war with China hampering its ongoing recovery
In an upfront chat, Boeing CEO David Calhoun shared his thoughts on the ongoing US trade war with China and its impact on the company's recovery. He asserted that this trade war isn't expected to hinder Boeing's financial resurgence or prevent it from achieving aircraft delivery targets with Chinese airlines, who've reneged on accepting Boeing planes.
Speaking candidly on CNBC, Calhoun revealed that Boeing had three airliners in China ready for delivery, but brought two of them back to Seattle since the Chinese airlines that ordered the planes "deliberately ceased taking new aircraft deliveries due to the harsh tariff environment."
Beijing ramped up the import tax on American goods to a steep 125% this month, in retaliation to US President Donald Trump's decision to raise tariffs on products made in China to an eye-watering 145%. This tariff hike more than doubles the cost of passenger jets that Boeing, the US' largest exporter, sells for tens of millions of dollars.
Initially, Boeing aimed to complete 50 orders for Chinese airlines this year. However, Calhoun noted that the company is "actively reassessing" options to divert those jetliners to alternative buyers.
"We're dealing with a crappy situation, but we've got numerous clients who yearn for immediate deliveries. So, we're planning on rerouting the supply to fill the demand, and we won't continuously manufacture aircraft for customers who refuse them," he declared during a conference call with analysts.
The tussle between Washington and Beijing isn't as perilous for Boeing as it might have been a decade ago, when roughly a quarter of the aerospace colossus' completed planes headed to China, according to investment banking firm Jefferies.
Boeing's business in China nosedived in 2019, when the country grounded all Boeing 737 Max planes following a couple of fatal crashes that together claimed the lives of 346 people in less than five months. Chinese airlines didn't resume Max flights until January 2023, much later than other carriers in other countries.
Presently, China forms around 10% of an order backlog worth $500 billion that Boeing anticipates will take a decade to clear, Chief Financial Officer Brian West said.
About 70% of the commercial aircraft Boeing expects to deliver in 2025 are intended for international clients, West informed. If tariffs persuade countries besides China to adopt a similar stance and postpone accepting planes, "we would anticipate witnessing increased pressure" on Boeing's liquidity, he added.
"Considering our role as a significant US exporter, a free trade policy across commercial aerospace remains crucial for us," West said.
Trump's pursuit of tariffs to counter what he deems as the inconsistent trade practices of other nations comes at a time when Boeing was trying to move beyond a series of troubles, including a panel explosion during a 737 Max flight and a labor strike that shut down production last year. The company's revenue and stock value took a significant hit.
Calhoun stated the preliminary financial results Boeing reported indicated its recovery program "is well in motion and showing signs of effectiveness, although it's still early days."
Boeing posted an adjusted loss of 49 cents per share on revenue of $19.5 billion – figures that edged past analysts' predictions. The company also significantly reduced its cash burn to approximately $2.29 billion from nearly $4 billion in the preceding year.
Shares of Boeing, based in Arlington, Virginia, experienced a 6.6% surge in afternoon trading.
Trump declared sweeping tariffs on April 2 that ignited panic in the financial markets and stirred recession fears. The president put a temporary 90-day hold on the import taxes, but boosted his already steep tariffs against China.
US Treasury Secretary Steven Mnuchin stated, on Tuesday, that the situation was untenable and he expected a "de-escalation" in the trade war between the world's two largest economies.
- Boeing's CEO, David Calhoun, spoke about the ongoing US trade war with China and its impact on Boeing's recovery, stating that the tariff environment in China had caused two planes ready for delivery to be brought back to Seattle.
- Calhoun revealed that Boeing had aimed to complete 50 orders for Chinese airlines this year but is now "actively reassessing" options to divert those jetliners to alternative buyers due to the tariff-induced pause in deliveries.
- The Chinese government increased the import tax on American goods to 125%, more than doubling the cost of passenger jets that Boeing sells for tens of millions of dollars.
- Boeing's business in China has taken a hit, with China forming only around 10% of an order backlog worth $500 billion that Boeing anticipates will take a decade to clear.
- In an effort to fill demand, Boeing plans to reroute the supply of aircraft to other clients who yearn for immediate deliveries, choosing not to continuously manufacture aircraft for customers who refuse them.
- Considering Boeing's role as a significant US exporter, a free trade policy across commercial aerospace remains crucial, according to Boeing's Chief Financial Officer, Brian West.
- Trump's tariffs come at an unfortunate time for Boeing, as the company attempts to move beyond a series of troubles, including a labor strike and panel explosion during a 737 Max flight, which have negatively impacted its revenue and stock value.
