China Southern to buy 10 Boeing 787s
(AFP)
Updated: 2005-08-31 21:13

Boeing has finalised a deal to sell 10 787 aircrafts to China Southern Airlines, ahead of President Hu Jintao's visit to the United States where he will visit the company's headquarters.

Boeing has finalised a deal to sell 10 787 aircraft to China Southern Airlines, ahead of President Hu Jintao's visit to the United States where he will visit the company's headquarters. [AFP]

The deal is part of a broader agreement signed in January in which six Chinese airlines, including China Southern, agreed to buy a total of 60 jets worth 7.2 billion dollars, said vice-president of communications at Boeing China George Liu.

At list price, the China Southern deal is worth 1.2 billion dollars.

Its signing comes ahead of Hu's first ever visit next week to the United States as president, where further framework purchase agreements were likely to be signed, Liu said.

"Looking forward, watch out for Hu's visit, where he will stop by Seattle to visit Boeing," said Liu.

Like most of its economy, China's aviation industry is booming and it needs more planes to meet heavy demand.

Carriers hauled 121 million passengers last year, representing 16 percent annual growth that was twice the world average, according to Chinese statistics.

To date Chinese airlines have purchased a total of 52 Boeing 787s, the group's new long-distance 217-seater which it says is more fuel-efficient than other jets.

Three of the nation's largest carriers -- Air China (15 planes) and China Eastern Airlines (15), China Southern (10 planes) and the smaller regional Shanghai Airlines (nine) and Xiamen Airlines (three) -- have now bought the plane.

"It is not only conducive to improving the operation of China Southern Airlines but also enables us to provide better services to our growing passenger base throughout the globe," Liu Mingqi, vice chairman of the airline, said in a statement.

China's airlines will begin taking deliveries in July 2008, one month prior to the start of the Beijing Olympics, following the start of assembly production in 2006.

Hainan Airlines, in which international financier George Soros owns a 14.8 percent slice through American Aviation, has yet to conclude a final deal for the 787 but has signed an agreement of intent.

"We're still working on them," said Liu. "After a framework agreement is signed each sale has to be negotiated with each airline separately."

In the next two decades, Boeing, which currently has a 62 percent market share, sees potential sales to China of some 2,000 aircraft, while rival Airbus, predicts some 1,600.

Airbus and rival Boeing will also take their corporate dogfight to China at the end of September for the Beijing International Aviation Expo.

Analysts warned however that current prohibitively high fuel costs could derail future purchases.

"Under the circumstances of the current high oil prices, whether the newly purchased planes can bring profit to the companies remains unclear," said Li Lei, aviation analyst at Huaxia Securities.

"The industry does not look good, profits are weak and it's not that they don't want to buy but rather it's that their ability to pay has been affected by the high oil price," Li said.

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