Airbus gets US$22b China orders, in talks for superjumbos

An Airbus signage is pictured at the new Airbus Asia Training Centre in Singapore.
An Airbus signage is pictured at the new Airbus Asia Training Centre in Singapore. PHOTO: REUTERS

BERLIN/LONDON (BLOOMBERG) - Airbus won orders from China to supply 140 single-aisle and wide-body jets worth US$22 billion (S$30.38 billion) at list prices and said it's in talks to sell more A380 superjumbos as the Asian nation is set to become the world's largest aviation market.

The European planemaker secured an outline deal for 100 A320-series jets split between current and new-engine-option versions, as well as 40 of its latest twin-aisle A350s, chief executive officer Tom Enders said on Wednesday (July 5) in Berlin during a visit to the German capital by Chinese President Xi Jinping. The agreement was signed with state-owned China Aviation Supplies Holding Co, which will allocate the aircraft to individual airline operators over the next five to six years, according to Airbus.

"China is one of the world's most important markets for aviation today," Enders said. Talks are underway regarding a deal for more A380s to add to five sold to China Southern Airlines Co, with Airbus seeing demand for as many as 100 superjumbos in the region, he said.

China is expected to overtake the US as the world's biggest aviation market by around 2024. Airbus's rival Boeing has predicted the Asian country will need 6,810 aircraft in the 20 years through 2035, making it the world's biggest single-country market worth over US$1 trillion. Travel demand within China is expected to grow 6.1 per cent annually over the next two decades, according to the US planemaker.

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Airbus already has a narrow-body production line in Tianjin, east of Beijing, and output of the A320s will be split between that site and Europe, according to Enders. The company is also looking at expanding a Chinese completion operation for its existing A330 model to include the re-engined A330neo, as well as the A350, he said, while exploring further collaboration in helicopter manufacturing and space technology.

China's travel market grew almost 11 per cent last year, three times that of the US. Demand for seats has by and large kept pace with capacity addition. That has attracted investment from their rivals in the US to tap growth. American Airlines Group agreed to buy a 2.68 per cent stake in China Southern earlier this year and Delta Air Lines acquired a minority stake in China Eastern Airlines Corp in 2015.

Enders announced the plane sales at Airbus's Berlin offices after leaving the nearby German Chancellory, where Chancellor Angela Merkel separately detailed new accords with China also including Siemens and Daimler.

Airbus CEO said that while the order backlog for the A380 is "melting" following a sales blank last year and in the first six months of 2017, the planemaker is "not panicking yet," especially since cost savings will allow it to break even on a per-plane basis at a production rate of just one superjumbo a month.

Though the double-decker is proving tough to market, there are still sales leads, with China presenting realistic order prospects, he added.

"I don't think it impossible that we will have some success there in coming years," Enders said. "We are in talks."