Malaysia Airlines is seizing on the opportunity to expand its fleet by targeting Boeing jets that Chinese airlines may reject.
The interest follows Beijing’s recent direction to national airlines to defer Boeing deliveries due to escalating U.S.-China trade tensions. The move by parent company Malaysia Aviation Group (MAG) could accelerate the airline’s modernization plans.
However, the intention to acquire the Boeing aircraft comes with challenges in a competitive and uncertain market.
The Intensifying US-China Trade Conflict
The backdrop is and extended trade war intensifying between the U.S. and China. The U.S. has imposed 145% tariffs on Chinese goods, while China retaliated with 125% tariffs on American products. Notably, this also includes Boeing aircraft.
For Chinese airlines, this makes accepting new Boeing deliveries prohibitively expensive. A Boeing 737 MAX, valued at around $55 million, now faces steep additional costs. It has thus prompted carriers to being pausing or cancelling orders.
Recent instances highlight a growing trend. Juneyao Airlines deferred the delivery of a new Boeing 787-9 Dreamliner due to the new tariff imposition.
Earlier this week, a Boeing 737 MAX destined for Xiamen Airlines was returned to the U.S. from China’s Zhoushan completion center before delivery.
Malaysia Airlines in Talks with Boeing
According to major news sources, Datuk Captain Izham Ismail, MAG’s managing director, confirmed that Malaysia Airlines is in talks with Boeing to secure delivery slots vacated by Chinese carriers.
This could fast-track the airline’s goal of operating 55 next-generation Boeing 737 MAX jets by 2030. These potential acquisitions would notably be separate from MAG’s existing order of 25 737 MAX aircraft.
These are to be leased through Air Lease Corporation, with deliveries scheduled between 2023 and 2026. To fund the additional jets, MAG is considering tapping the capital market, signaling confidence in the strategic move.
Risks and Challenges
The opportunity appears enticing but it is not without risks. Analysts acknowledge that faster deliveries could bolster Malaysia Airlines’ fleet. However, rising costs for aircraft parts and potential declines in passenger demand due to economic pressures could strain finances.
Competition for these delivery slots is also fierce, with carriers like Air India reportedly vying for the same jets. Neither Boeing nor Chinese authorities have formally clarified the reasons behind the returned aircraft, adding uncertainty to the situation.
Conclusion
Malaysia Airlines’ proactive approach reflects its ambition to modernize and stay competitive in a challenging aviation landscape. By capitalizing on China’s delivery hesitations, the airline could strengthen its position. This would be provisional on it being able to navigate the financial and competitive hurdles ahead.
As trade tensions between the US and China roll on, Malaysia Airlines’ next steps will be closely watched.
Buy Our Magazine!
