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Chinese state airlines to buy almost 300 Airbus jets

Economy Jul 01, 2022 03:16PM ET
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© Reuters. FILE PHOTO: The Airbus A320neo (New Engine Option) takes off during its first flight event in Colomiers near Toulouse, southwestern France, September 25, 2014. REUTERS/Regis Duvignau

BEIJING/SYDNEY (Reuters) -China's "Big Three" state airlines pledged on Friday to buy a total of almost 300 Airbus jets, the biggest order by Chinese carriers since the start of the COVID-19 pandemic and a breakthrough for Europe as Boeing (NYSE:BA) remains partially frozen out of China.

In apparently coordinated announcements, Air China (OTC:AIRYY) and China Southern Airlines said they would each buy 96 A320neo-family jets worth $12.2 billion at list prices. China Eastern Airlines (NYSE:CEA) said it would buy 100 airplanes of the same type, worth $12.8 billion.

Airlines typically receive substantial discounts to list prices and China Eastern said these were larger than usual.

China's huge market accounts for a quarter of Airbus and Boeing deliveries in a normal year. But China has largely stood back from the global jet market as it juggled both the impact of COVID-19 and protracted trade tensions with the United States.

Industry sources said Beijing broadly balances jet purchases between Europe and the United States over time, with such large deals typically held in reserve for state visits.

But Friday's deal signalled a visible step towards Beijing's European supplier, they said. Until now, global trade and diplomatic tensions have broadly had the effect of delaying politically sensitive import decisions across the board.

Boeing reacted sharply to the announcement, unusually crediting "constructive dialogue" between European governments and Beijing for the blockbuster order and urging the U.S. and Chinese governments to engage in productive discussions.

"As a top U.S. exporter with a 50-year relationship with China’s aviation industry, it is disappointing that geopolitical differences continue to constrain U.S. aircraft exports," Boeing said in an emailed statement.

"Boeing aircraft sales to China historically support tens of thousands of American jobs, and we are hopeful orders and deliveries will resume promptly."

'EXTENSIVE DISCUSSIONS'

Boeing's 737 MAX has yet to resume commercial flights in China, even though the country joined other regulators late last year in lifting a grounding order imposed during a safety crisis.

So far this year, Boeing has delivered only one commercial jet to China against 47 for Airbus. It has about 150 airplanes waiting to be delivered to China, according to some estimates.

Airbus painted the win as a purely commercial victory, saying it demonstrated "strong confidence in Airbus". In a statement, it said the deal followed "long and extensive discussions" but did not mention any diplomatic support.

One diplomatic source played down any political involvement but noted challenges in ramping up output to deliver such a large number of planes while global supply chain problems persist.

The deal is subject to Chinese government approvals.

Airbus shares rose more than 3%. Boeing rose around 1,3% after slipping in pre-market trading.

China's airline industry, which took a heavy hit after authorities locked down Shanghai in April, has been steadily recovering in recent weeks.

China Eastern said the new narrowbody jets would be mostly deployed on domestic routes and on flights to neighbouring countries.

Deliveries will run from 2023 to 2027, with the bulk expected from 2024. Air China said its purchase would represent a 10.4% increase, while China Southern expects a 13% increase.

China Eastern has been roiled by the crash of a Boeing 737-800 jet in March, killing 132 people on board. Investigators are examining the actions of the crew, with no evidence found of a technical malfunction, people briefed on the matter have said.

Chinese state airlines to buy almost 300 Airbus jets
 

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Andrea Luo Jul 01, 2022 11:45PM ET
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