China Eastern spends USD10b on aircraft

May 3, 2016 by  
Filed under Asia, China PRC, News

BEIJING, 3 May 2016: One of China’s top airlines will split USD10 billion of new orders between European manufacturer Airbus and US-based Boeing, it said, as competition heats up for aviation market share in the world’s second-largest economy.

China Eastern Airlines said in a statement to the Hong Kong stock exchange that the lion’s share of the orders, nearly USD6 billion, will go to Airbus for 20 A350 aircraft.

It will also spend close to USD4 billion on 15 Boeing 787-9 Dreamliners.

inside no 8The bitter aerospace rivals have been in a fierce battle for orders in China, which is forecast to have 1.7 billion air passengers by 2034, and is poised to become the largest civil aviation market in the world in the next two decades.

China Eastern is one of China’s top three airlines, operating 560 aircraft and carrying around 100 million passengers annually.

The Shanghai-headquartered company plans to use the long-haul planes for travelling between China, North America and Europe, and to replace retired aircraft.

They were intended to build “a streamlined and efficient, well-constructed and industry-leading passenger aircraft fleet”, it said, and “provide vast amount of passengers with more comfortable on-board services”.

China is now Airbus’ largest market, accounting for nearly a quarter of the planes it delivered in 2015.

inside no 8.1In March, the company started construction on a new USD150 million facility in the port city of Tianjin, northern China, to deliver wide-body planes in the country.

Airbus says it has gone from 27% market share in the country in 2004 to roughly 50% today.

Boeing also plans to open a completion centre in China, it announced last year. The company sold 300 aircraft worth a record USD38 billion during President Xi Jinping’s visit to the US in 2015.

The China Eastern orders come a day after Boeing reported an 8.8% drop in first-quarter earnings to USD1.2 billion, partly due to sluggish aircraft deliveries into a slowing global economy.

But China hopes some of the massive civil aircraft market will go to its home grown planes.

State-owned Commercial Aircraft Corp. of China (COMAC) has already delivered its first domestically-made regional jet, and rolled out a narrow-body C919 plane in November.

In the long term COMAC aims to produce an even larger wide-body jet in cooperation with Russia’s United Aircraft Corp, whose products include the Sukhoi Superjet 100.

China Eastern’s announcement late Thursday came alongside its first-quarter results, in which it said net profits rose 66.4% year-on-year to 2.6 billion yuan (USD400 million).

Dai Yaxiong, an analyst at Sinolink Securities, told AFP: “China Eastern bought the wide-body aircraft mainly to invest in its international routes as outbound travel is quite hot and the gross profit margins for international flights are much higher than domestic ones.”

Falling fuel prices were the main driver of the rise in profits, he said, adding: “The demand for civil aviation was also quite stable.”

China Eastern shares were down 0.81% in Shanghai by the break on Friday.

© 1994-2016 Agence France-Presse

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