Boeing in scramble to shore up 737 MAX financing - sources

By Tracy Rucinski and Tim Hepher (Reuters) - Boeing is scrambling to shore up financing for the 737 MAX as it awaits regulatory approval for design changes after the plane was grounded following two fatal crashes, industry sources said. Boeing is anxious to resume deliveries once regulators declare it safe and airlines agree training.

Reuters July 11, 2020 00:06:59 IST
Boeing in scramble to shore up 737 MAX financing - sources

Boeing in scramble to shore up 737 MAX financing  sources

By Tracy Rucinski and Tim Hepher

(Reuters) - Boeing is scrambling to shore up financing for the 737 MAX as it awaits regulatory approval for design changes after the plane was grounded following two fatal crashes, industry sources said.

Boeing is anxious to resume deliveries once regulators declare it safe and airlines agree training. But confidence in the jet has been hit by the 15-month grounding, making the financing needed to ensure smooth deliveries scarce and compounding a dearth in demand due to the coronavirus crisis.

"Nobody wants to take new aircraft and this is particularly true for the MAX right now," a senior aviation financier said.

The value of MAX jets on the aircraft market has fallen by 11% since the start of 2020 and is likely to face more pressure in coming months, depending on the timing of its return, Eddy Pieniazek of aviation advisers Ishka said.

With capital markets unavailable after the collapse in air travel during the coronavirus crisis and banks refusing most new business, only leasing companies have spare financing capacity though many are also fighting their own problems, bankers say.

Boeing's strategy, first reported by Reuters last month, has been to encourage lessors to strike deals with airlines to buy MAX jets and rent them back to airlines.

In return, Boeing is seen ready to allow the same leasing companies to cancel part of their own plans to buy MAX jets directly, easing pressure on their balance sheets.

As a last resort, Boeing stands ready to buy back jets and lease them to airlines itself as a temporary measure through its Boeing Capital financing unit, an aviation market source said.

Singapore's BOC Aviation last month canceled 30 of the jets shortly after it had struck purchase-and-leaseback deals for MAXs with United Airlines and Southwest in what many in the industry saw as related moves.

Boeing is now trying to facilitate similar deals for leasing companies to step in and finance deliveries for launch customer American Airlines , the sources said.

Previous financing for some of the 17 MAXs that American was meant to receive this year has expired, triggering talks with Boeing, people familiar with the matter said, noting that American was seeking the same pre-pandemic terms.

The Wall Street Journal said American had threatened to cancel some orders unless Boeing helped with funding.

Boeing said it would not comment on customer talks. American, which has 76 MAXs on order, declined comment.

The loss of a high-profile order from American would deal a harsh blow to the MAX program it helped launch in 2011.

Boeing was forced to tear up plans for an all-new plane and agree a faster upgrade to its 737 after American was on the verge of handing an entire 460-plane order to Airbus .

(Reporting by Tracy Rucinski, Tim Hepher; additional reporting by Ankit Ajmera in Bengaluru; Editing by Ramakrishnan M. and Alexander Smith)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.