Boeing (BA) is coming off one of its worst years in recent memory, with the Max jet crisis leading to more cancellations than orders for new planes in 2019. But President Trump’s new “phase one” trade deal with China could be enough to reopen one of Boeing’s key markets and jumpstart orders again.
“They have to buy a lot of manufactured goods from the U.S. The U.S. doesn’t make a lot of manufactured goods,” Stephen Guilfoyle, president of trading firm Sarge 986 LLC, told Yahoo Finance’s “The First Trade.” “Boeing, when things are operational, makes expensive stuff and China needs to buy it.”
The phase one deal requires China to buy $200 billion in American goods, including aircraft. While exact details of the deal were not made public, Boeing, as the only American passenger jet maker, is the likely beneficiary.
In October, now-ousted CEO Dennis Muilenburg blamed China for some of Boeing’s troubles. No Chinese airline had ordered a Boeing jet since November 2017.
“The lack of orders from China in the past couple of years has put pressure on the production rate,” Muilenburg said on October’s earnings call. That lack of orders led Boeing to plan cuts to its production rate for the 787 Dreamliner to 12 per month, starting later this year. Boeing separately is stopping production of its 737 Max jets as it waits for regulatory approval to return those jets to the air.
Boeing 737 MAX jets sit parked Monday, Dec. 16, 2019, in Renton, Wash. Boeing Co. will temporarily stop producing its grounded 737 MAX jet as it struggles to get approval from regulators to put the plane back in the air. (AP Photo/Elaine Thompson)
In a statement, the new Boeing CEO, Dave Calhoun, applauded Trump and President Xi for this new deal. He also signaled that Boeing was ready for orders to resume.
“Boeing has a long-standing partnership with China that spans nearly 50 years,” Calhoun said. “We’re proud that Boeing airplanes will continue to be a part of this valued relationship, one that has fueled aerospace innovation and sustained manufacturing jobs.”
Boeing, of course, still has to reckon with the ongoing grounding of its Max jets. Southwest (LUV), United (UAL) and American (AAL) have all pulled the planes from their schedule through June and there’s little evidence the jets will be back in the air before the summer.
Still, David Nelson, chief strategist at Belpointe Asset Management, said Boeing is due for a rebound.
“I think what investors understand with Boeing is it’s a duopoly,” Nelson said. “They understand that Airbus, even if they got all the orders, can’t manufacture the plane. So Boeing is going to come out of this at some point.”
Read more:
Why we won’t get a Phase 2 trade deal ‘until sometime in 2021’
Boeing 737 Max disclosures put shareholders before workers, union rep says
Trump should ‘absolutely’ get credit for changing the China conversation: analyst
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit.