Airbus agrees multibillion-dollar package of deals with Chinese carriers

Airbus is to sell close to 300 aircraft to Chinese companies in a multibillion-dollar package of deals that will strengthen the European group’s foothold over US rival Boeing in the world’s second largest aviation market.

The European manufacturer’s series of agreements with Chinese carriers, which involves the sale of 292 planes worth more than $37 billion (€35.5 billion), are the country’s first big purchases since the Covid-19 pandemic.

The deals are a major coup for Airbus in its battle with Boeing as China is a vital growth market for the world’s two biggest aircraft manufacturers.

It also highlights Boeing’s problems in China since the two fatal crashes of 737 Max jets in October 2018 and March 2019.

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China was the first country to ground the aircraft. While the Max is flying again in most major markets, none of the Chinese airlines have yet returned the planes to commercial service, despite the country’s aviation regulator last year deeming it to be airworthy again.

Airbus struck a similar deal with Beijing, agreeing to sell about 300 aircraft worth an estimated €30 billion, shortly after the second Max crash in 2019.

Boeing has also continued to grapple with a series of production issues as well as the fallout from the Max crashes, helping Airbus surge ahead of its rival with strong demand for its narrow-body jets.

China Eastern Airlines said it would buy 100 of Airbus’s popular single-aisle A320neo family of jets, Air China will take 64 of the aircraft, while its Shenzhen Airlines subsidiary is purchasing another 32.

In addition, China Southern Airlines, a carrier Boeing has historically counted as its biggest customer in the country, said it will buy 96 A320neos, as well as lease additional planes.

China Southern’s Airbus deal follows its decision in May to remove more than 100 of the 737 Max jets from its fleet plans, citing uncertainty over deliveries.

The orders are a “solid endorsement from our airline customers in China of the performance, quality, fuel efficiency and sustainability of the world’s leading family of single aisle aircraft”, said Christian Scherer, Airbus chief commercial officer.

Airbus in May said it was pushing ahead with aggressive plans to increase output of its narrow-body aircraft by 50 per cent to 75 a month in 2025, despite concerns over the state of the supply chain. Airbus is already in the process of increasing production to 65 a month by the summer of 2023.

Deliveries of the jets ordered by the Chinese airlines on Friday will take place between 2023 and 2027, according to stock exchange filings.

While much of the global airline industry has benefited from resurgent passenger demand as restrictions have continued to ease following the pandemic, the recovery has been slower in China and the Asia-Pacific region.

Flight capacity in the region continues to show negative year-on-year growth in the face of tight restrictions and lockdowns across some jurisdictions, according to a report by industry consultancy IBA Insight published on Friday.

Analysts at Jefferies recently downgraded Chinese airlines, citing China’s zero-tolerance and quarantine policy as a key factor for ongoing headwinds facing the sector. The bank cut its Chinese total passenger growth forecast to just 2.7 per cent growth this year, down from an original forecast that predicted growth of 15.4 per cent. — Copyright The Financial Times Limited 2022