Boeing shares surge as 737 MAX closes in on return in China

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A Boeing 737 MAX airplane lands after a test flight at Boeing Field in Seattle, Washington, U.S. June 29, 2020. REUTERS/Karen Ducey/File Photo

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  • Directive instructs airlines on revisions required before return to service
  • Boeing shares close 7.5% higher
  • China has not specified when it will lift a MAX airspace ban
  • Model has been grounded in China since March 2019

BEIJING/SYDNEY, Dec 2 (Reuters) - China's aviation authority on Thursday issued an airworthiness directive on the Boeing 737 MAX that will help pave the way for the model's return to service in China after more than 2-1/2 years, leading to a surge in the planemaker's shares.

The directive instructs airline operators on the revisions required before the MAX returns to service, although it does not specify when China will lift a ban on the MAX in its airspace.

Boeing Co (BA.N) described the directive as an "important milestone" toward the return of service in China and its shares closed 7.5% higher, pushing the Dow Jones index (.DJI) up 1.73% in its biggest one-day percentage gain since March. read more

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The Civil Aviation Administration of China (CAAC), which was the first regulator globally to ground the MAX in March 2019 after two deadly crashes, said it had completed a review of the design changes proposed by Boeing.

"After conducting sufficient assessment, CAAC considers the corrective actions are adequate to address this unsafe condition," the regulator said in a statement on its website.

"The CAAC's decision is an important milestone toward safely returning the 737 MAX to service in China," Boeing said on Thursday. "Boeing continues to work with regulators and our customers to return the airplane to service worldwide."

Before the 737 MAX was grounded, Boeing was selling one-quarter of the planes it built annually to Chinese buyers, its largest customers.

The CAAC did not immediately respond to a Reuters request for comment on the next steps required before the MAX returned to service. The regulator had sought industry feedback last month before issuing the airworthiness directive. read more

It previously outlined three principles for the jet to return to service in China, involving certified design changes, proper training for pilots and specific and definitive findings into the two crashes in Indonesia and Ethiopia.

Boeing Chief Executive David Calhoun said in October the company was working toward gaining Chinese approvals by the end of the year for the 737 MAX to fly, with deliveries expected to resume in the first quarter of 2022.

Around a third of about 370 undelivered 737 MAX airplanes in storage are for Chinese customers, Boeing said at the time.

China's authorisation of the 737 MAX is very good news, which will support the drawdown of undelivered MAX inventory, Safran (SAF.PA) CEO Olivier Andries told reporters on Thursday.

Safran makes MAX engines as part of the CFM International joint venture with General Electric Co (GE.N).

Beyond safety concerns, Boeing's sales in China have been hobbled by U.S.-China trade tensions, with Washington accusing Beijing of blocking purchases of Boeing planes by its domestic airlines.

Other Asia-Pacific countries - including Singapore, Malaysia, India, Japan, Australia and Fiji - have already approved the return of the 737 MAX.

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Reporting by Stella Qiu in Beijing and Jamie Freed in Sydney; Additional reporting by Tim Hepher in Paris, Ambar Warrick in Bengaluru; Editing by Jason Neely and Peter Cooney

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