Boeing Shares Gain After Key European Customers Show Faith in Grounded 737 MAX

A major Europe-based leasing company, as well as the region's biggest travel group, will defer, but not cancel, bulk orders for Boeing's grounded 737 MAX aircraft.
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Boeing Co.  (BA) - Get Report shares traded higher Wednesday after a key 737 MAX customer said it would delay, but not cancel, parts of a 113 order for the ground aircraft. 

SMBC Aviation Capital, a Japanese-owned aircraft leasing company based in Dublin, said it would defer the delivery of 68 737 MAX jets, which have been grounded by regulators around the world for more than a year following fatal crashes in 2018 and 2019, until at least 2025. 

The order confirmation followed a financial agreement between Boeing and Germany's TUI Group  (TUIFY)  that provides compensation for delayed 737 MAX deliveries, but keeps most of the order book intact, for Europe's biggest travel and holiday company. CEO Peter Barrett said he doesn't expect any order cancellations at this point, and noted he's seeing 'green shoots' of renewed demand from customers in Asia.

Boeing shares were marked 2% higher at $156.35 each in early Wednesday dealing, a move that would still leave the stocks with a year-to-date decline of around 52%. 

Late last month, Boeing said it has resumed production of its troubled 737 MAX aircraft, while revealing plans to cut more than 12,000 jobs, as it awaits approval from the Federal Aviation Administration, as well as regulators around the world, that would allow the plane to return to service following crashes in Indonesia and Ethiopia that killed 346 people.

FAA Administrator Stephen Dickson, in fact, will testify before Senate lawmakers later this month as part of an ongoing probe into the crashes and questions over the regulator's ability to supervise safety procedures at the world's second-largest planemaker.

Boeing's net orders for the year, as of the end of April, were pegged at -255, including 281 cancellations of the grounded 737 MAX, and demand is unlikely to return to last year's levels until commercial airline capacity improves.

Even if that happens this year, the sector is likely to be burdened by around $120 billion in new debt, the International Air Transport Association estimated Wednesday, putting further pressure on its ability to expand with new aircraft.