By Karl Sinclair

April 23, 2025, © Leeham News: China represents 10% of Boeing’s commercial airliner backlog,

Boeing first quarter 2025 earnings report.

CFO Brian West clarified on the Boeing 1Q2025 earnings call. About 50 aircraft are scheduled to be delivered to China this year, but all are in limbo due to President Donald Trump’s trade war tariff fight, which began this month.

Previously thought to represent some 2% of the commercial backlog, with another 2%- 3% added for lessors, it was revealed that China represents 10% of the Boeing (BA) backlog. There are 130 Boeing jets identified in the backlog destined for China. With 6,319 Unidentified orders, about 500 are placed by China’s airlines and lessors.

“We have roughly 50 airplanes in our plan this year going into China, so we’re going to be pretty pragmatic with what we do here. For those airplanes that haven’t been built yet, we’ll be looking to maybe redirect those to other customers. For the airplanes that have been built, we call it re-marketing,” said Boeing CEO Kelly Ortberg on the CNBC financial network this morning.

Re-marketing, as Ortberg puts it, can be a costly endeavour.

At the end of FY2024, Boeing still had 50 aircraft in inventory (40 for China) it needed to “re-market.”

The 737 MAX program also incurred abnormal production costs and write-offs of ~$22bn since the grounding.

It was revealed that Boeing also had four 787s in production destined for China.

Holding onto inventory, especially commercial aircraft that need to be maintained, can be an expensive exercise.

Increasing production rates

Perhaps Ortberg was slightly optimistic when he said, “We will increase to five airplanes a month when we go through rate increases. The first one will be 38 to 42. The next rate increase, likely about six months after the first rate increase, will be from 42 to 47. And we want to be in the mid-50s when we get production stabilized.”

According to Ortberg, Boeing is currently producing at 31/mo, and jumps of that magnitude in six-month increments, especially in the current supply chain environment, are unheard of.

Ortberg also believes that Boeing will be able to recoup tariffs imposed on foreign-made components when they are sold outside the US.

“The tariffs we’re paying, for example, in Japan and Italy, for those airplanes that we deliver outside of the US, we’re able to draw that back”, he said.

Under the current US law, “new tariff rates that are being adopted apply only to permanent imports into the United States,” law firm Vedder Price said on April 8, six days after Trump announced tariffs.  “While subject to a bond and certain other requirements, temporary imports will not be subject to tariffs. Keep in mind that temporary imports involve items that will not be sold or used in the United States. Instead, the item enters the United States on a temporary basis only and typically for the purpose of undergoing repairs, alterations or some processing and then will leave the United States within the required timeframe.”

On the demand for aircraft already produced for Chinese customers, Ortberg said, “Customers are calling, asking for additional airplanes. This is really gonna be just a short-term challenge for us to either have China reverse course and take the airplanes or get us in a position to re-market those airplanes. And as you know, to re-market them, we’ll have to do some things like painting them and things like that”.

Painting them and reconfiguring may sound simple, but it’s not.

Jeppesen Sale

When queried about the impact on future earnings that might occur once the deal to sell Jeppesen, ForeFlight, AerData, and OzRunways closes in late 2025, West was non-committal.

“… [T]he service business will continue to perform in that [it will] grow in the mid-single-digits revenue and deliver nice mid-teen margins,” West said. BGS delivered a margin of 18.6% in 1Q2025, up 40 basis points, year over year. That is closer to high-teens than mid-teens.

If Boeing stays the course, what it will do with the $10.5bn it receives at the end of 2025 will also be fairly obvious.

“Debt balance ended at $53.6 billion, down $300 million due to the pay down of maturing debt and leaving $550m of debt maturities remaining in the year,” detailed West.

At the end of 2024, short-term debt and the current portion of long-term debt jumped to $7.93bn from $1.278bn.

Boeing will pay down $550 m in debt in the next three quarters. Therefore, about $7.380bn in debt is due in 1Q2026.

The $10.55bn in cash received for the Jeppesen sale will be used to pay that obligation, leaving Boeing with $3.17bn in cash from the deal.

2Q2025 Guidance

 Cash burn in the second quarter is expected to be similar to 1Q2025, with perhaps a slight improvement, showing in the expected annual burn rate of $4bn-$5bn.

Expected 737 MAX and 787 deliveries are projected to hold, even with the impacts of the Chinese embargo.

West also explained who would be on the hook for any input increases due to tariffs.

“I’d also say that, keep in mind that over time, any input related costs will work its way through to price escalators. It should mostly neutralize over time. Then in addition to what Kelly said about the suppliers, as you know, many are on fixed price, like a program contract, where the importer record does pay the tariff,” he said.

LNA first reported that Boeing views sales contract escalation clauses as its mechanism to pass the tariffs on to the buyer.

Boeing will try to use contract clauses to pass through increases to customers, while letting suppliers take the hit for any tariffs paid for goods shipped to Boeing.

CNBC financial pundit Jim Kramer made an interesting point prior to the start of the interview with Kelly Ortberg.

He said that countries around the world should order Boeing aircraft to pressure decision-makers about America’s largest exporter. With delivery slots unavailable until the early 2030s, he intimated that those ‘orders’ could be cancelled and used as a negotiating tactic.

Deferred Production Costs

The breakdown of capitalized costs stored using program accounting is detailed in the Boeing 10-Q SEC filing for the quarter.

Deferred production costs and customer compensation rose once again, during the quarter, adding $1.819bn to the Balance Sheet value of Inventory, which are expenses.

This relates to the $2.4bn difference between reported program accounting margins ($537m) and actual unit-cost figures ($2.933bn).

As of March 31, 2025, 35 737 MAX aircraft produced prior to 2023 are in inventory, 25 of which are for customers in China.

There are 20 787 aircraft in inventory, produced before 2023 and that require rework, four of which are for customers in China.

For comparison, Boeing reported this in previous filings:

Commercial aircraft programs inventory includes approximately 335 737 MAX aircraft and 110 787 aircraft at December 31, 2021 as compared with 425 737 MAX aircraft and 80 787 aircraft at December 31, 2020. – 2021 Annual Report.

 We have approximately 250 aircraft in inventory as of December 31, 2022, including approximately 140 aircraft in inventory that are designated for customers in China. We are remarketing some of these aircraft to other customers. – 2022 Annual Report.

At the end of 2021, Boeing 737 MAX inventory had a total of 425 aircraft, with 140 destined for China.

At the end of 2024, 40 aircraft for China still remained. That was drawn down to 25 aircraft during 1Q2025, due to an increase in deliveries to Chinese customers.