Boeing wins $10 billion deal from Chinese airlines

HONG KONG Tue Mar 8, 2011 4:46pm EST

A model of Boeing 787-8 passenger plane is displayed inside its booth at the Asian Aerospace Show in Hong Kong March 8, 2011. REUTERS/Bobby Yip

A model of Boeing 787-8 passenger plane is displayed inside its booth at the Asian Aerospace Show in Hong Kong March 8, 2011.

Credit: Reuters/Bobby Yip

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HONG KONG (Reuters) - Boeing Co (BA.N) sealed deals worth $10 billion with two airlines in China, the world's fastest growing market, which is likely to buy more than 2,000 aircraft over the next five years.

China expects to order 1,100 new transport aircraft and 1,000 general aviation aircraft, Wang Changshun, vice minister of the Civil Aviation Administration of China, said at an Asian aerospace conference on Tuesday.

Last-minute orders for 200 planes in December pushed EADS EAD.PA subsidiary Airbus past its U.S. rival for a third year. Both aircraft makers are flying high on demand from emerging economies and low-cost airlines and a shift toward less fuel-thirsty jets.

Later on Tuesday ILFC, the world's biggest plane leasing company, placed an order for 33 Boeing 737-800s and 100 revamped narrowbodies from the A320neo family.

Airbus said Turkish Airlines (THYAO.IS) had placed a firm $1.6 billion order for 13 of its aircraft, ordering 10 A321 passenger planes and three A330-200 freighters.

"Boeing and Airbus have a backlog of something like 7,000 planes in total. Right now they are just clearing the backlog of deliveries and so as these new planes come into the industry, that will impact supply and capacity," said Andrew Orchard, an analyst at RBS in Hong Kong.

As air travel becomes more popular among China's increasingly wealthy population, Chinese airlines are keen to expand fleets to compete with players such as Singapore Airlines (SIAL.SI) and Cathay Pacific. (0293.HK)

China's purchases of aircraft will help drive overall demand in Asia-Pacific, where average annual air traffic growth is expected to grow by 6.8 percent over the next 20 years, higher than the global pace, Boeing said. Asia-Pacific is likely to make up a third of global plane demand over the next 20 years.

LONG-HAUL REQUIREMENTS

Air China Ltd (601111.SS) (0753.HK), the country's flagship carrier, said it plans to buy five Boeing 747-8 aircraft worth a list price of about $1.5 billion, a move which would be a boost for the slow-selling superjumbo jet.

Three customers have ordered the aircraft that is Boeing's answer to the Airbus A380. Lufthansa (LHAG.DE) ordered 20 a few years ago, while Korean Air (003490.KS) ordered five last year.

"We are talking to airlines around the world that have long-haul market requirements that need an airplane of around 450 seats," Marlin Dailey, executive vice president, sales & marketing commercial airplanes of Boeing, told reporters. "I think this will be a very good year for the 747 program."

The 747-8 was the last of a very long line of very successful 747s, said Andrew Herdman, director general of industry body Association of Asia Pacific Airlines. But so far there has been caution about adopting it.

"It's a feeling that there probably won't be more derivatives of that so this is the end of the line in terms of that particular type," Herdman said.

In a separate deal, HNA Group, parent of Hainan Airlines Co Ltd (600221.SS), signed a memorandum of understanding with Boeing to purchase 38 aircraft, including six 777s and 32 787s.

The deal is worth $8.5 billion at list prices.

Boeing now has half of China's market share, with the rest mainly supplied by Airbus. Asia-Pacific demand for aircraft will likely form a significant portion of the demand from global airlines, which Boeing said would need 30,900 new passenger and freighter aircraft by 2030, valued at $3.6 trillion.

In the short term, however, the industry's outlook will also be clouded by uncertainties in the global economy.

"This year will be a bit slower than last year, the reason being that most of the near-term production capacity that we have available has already been sold," Dailey said.

"And so airlines are going to slow down a bit before they make those decisions because they are talking about airplane availability in the 2014/15 time frame," he said.

(Additional reporting by Donny Kwok, Farah Master and Kyle Peterson; Writing by Lee Chyen Yee; Editing by Anshuman Daga, David Holmes and Matthew Lewis)

($1=HK$7.78)

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Comments (2)
kc10man wrote:
Too bad it will take 10 years for those planes to be delivered.

Mar 08, 2011 7:44pm EST  --  Report as abuse
ROWnine wrote:
Big impact on the bottom line of our trade imbalance sheets. Keep an eye on this deal since our production capacity is low they are apt to start jobbing off the parts to China who will claim since the parts are part of a greater whole they really aren’t Chinese so it still looks good on the trade sheets but really just makes the imbalance sheets murky. Remember when we sold the Soviets wheat and cut a deal were it would all be shipped by our merchant marine that had dwindled to nothing so the Soviets and others shipped it. That didn’t work out to well for our sailors and merchant industries but we keep selling ourselves short all the same.

Mar 08, 2011 8:41pm EST  --  Report as abuse
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