Chinese airline orders $10B in planes from Airbus, Boeing

China Eartern Airlines orders $10B worth of planes from Europe's Airbus and US' Boeing

Photo by: Wikimedia Commons
Photo by: Wikimedia Commons

China Eastern Airlines A330-200 at Frankfurt Airport.

One of China's top airlines will split $10 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 $6 billion, will go to Airbus for 20 A350 aircraft.

It will also spend close to $4 billion on 15 Boeing 787-9 Dreamliners.

The 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.

In March, the company started construction on a new $150 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 percent market share in the country in 2004 to roughly 50 percent today.

Boeing also plans to open a completion centre in China, it announced last year. The company sold 300 aircraft worth a record $38 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 percent drop in first-quarter earnings to $1.2 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 homegrown 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 percent year-on-year to 2.6 billion yuan ($400 million).

Dai Yaxiong, an analyst at Sinolink Securities, told Agence France Presse: "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 percent in Shanghai by the break on Friday.