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Why Boeing Shares Are Flying High Today

What happened

One of the world's most important aviation markets is easing COVID-related travel restrictions. Shares of Boeing (NYSE: BA) are taking off as a result, up as much as 6% on Tuesday.

So what

The pandemic hit airlines and their suppliers hard, and around the globe the rebound has been uneven. While the U.S. domestic aviation market is seeing strong demand for travel this summer, other places including China remain restricted.

On Tuesday, China released an updated protocol that calls for inbound traveler quarantine times to be reduced by half. Travelers will now be required to spend seven days in a quarantine facility, down from a 14-day hotel quarantine previously required.

While China still has harsher restrictions than most of the world, the move is a step in the right direction and good news for airplane suppliers like Boeing. China was the world's largest aviation market prior to the pandemic, accounting for about one-fifth of total global plane deliveries. And before the pandemic, China had been expected to account for upward of a quarter of commercial airplane sales in the next 10 years.

Boeing's 737 MAX, a key component of that order book, remains grounded in China. But earlier this month, a key Chinese customer resumed test flights of the airplane, which was seen as an indication the plane could be cleared to fly in China in the near future.

Now what

A reopening of China to Boeing planes is a key part of the recovery story for the company, but investors should be careful not to get too far ahead of that rebound. There is still a lot of uncertainty surrounding the Chinese market, including continued COVID questions and geopolitical tensions between the U.S. and China that could impact large-ticket items like airplanes.

Boeing faces a multiyear recovery from the pandemic even in the best-case scenario, and given the amount of uncertainty surrounding China, COVID, and the global economy, there is a lot that can go wrong up ahead. This is a step in the right direction, but no reason for investors to rush into the stock.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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