Wednesday, January 19, 2011

Chinese Government approves 200 airplane deal with Boeing

The Chinese government on Wednesday formally approved orders for 200 Boeing aircraft, a mix of 737s and 777s, for delivery to Chinese airlines from 2011-2013, clearing commitments valued at $19 billion at list prices that the manufacturer has booked over the last several years.

The announcement was part of a series of purchase agreements with US companies valued at $45 billion approved by Chinese officials Wednesday in Washington, where Chinese President Hu Jintao and US President Barack Obama engaged in high-level meetings. Also announced was a GE Aviation-AVIC avionics joint venture. Boeing Chairman, President and CEO Jim McNerney was among the US business executives who attended a Wednesday meeting with Hu and Obama.

The manufacturer said building the 200 aircraft "positively impacts more than 100,000 jobs including those at Boeing and with its thousands of suppliers throughout the US." Commercial Airplanes President and CEO Jim Albaugh said in a statement, "We value China's support for our products and its confidence in Boeing … This deal is a win-win for the Boeing-China partnership, which is approaching its 40th anniversary."

Beyond adding to the atmospherics of Hu's visit, there does not appear to be any real importance to the timing of the announcement, which relates to aircraft already in Boeing's backlog. On the other hand, official approval of aircraft deliveries may be significant given that CAAC is promising to strictly control Chinese carriers' fleet additions in 2011, requiring airlines to limit capacity growth while improving aircraft utilization and load factors. China's total commercial aircraft fleet is expected to reach 1,827 units by the end of this year with an increase of 290 aircraft and the phasing out of 67.

Boeing in November predicted China will become the world's No. 2 aircraft market over the next 20 years, requiring 4,330 new commercial aircraft valued at $480 billion and tripling its fleet size. It believes China will become its "largest commercial airplane customer" in the future.

(Aaron Karp - ATW News)

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