Airbus secures $47b jet deal with China in new blow to Boeing

Chinese President Xi Jinping making a speech as French President Emmanuel Macron looks on during a state dinner at the Elysee Palace in Parison Monday. China has placed a $47 billion order with the European planemaker Airbus.
Chinese President Xi Jinping making a speech as French President Emmanuel Macron looks on during a state dinner at the Elysee Palace in Parison Monday. China has placed a $47 billion order with the European planemaker Airbus.PHOTO: REUTERS

PARIS • Airbus secured a US$35 billion (S$47 billion) jet deal from China during a state visit this week by President Xi Jinping to Paris, dealing a fresh blow to Boeing as it grapples with the grounding of its best-selling jet.

The mammoth order consists of 290 A-320-series narrow-body planes and 10 A-350 wide-bodies, the Toulouse-based Airbus said after the transaction was announced in Paris on Monday.

The deal's value is almost double that touted by French President Emmanuel Macron in January last year during a trip to Beijing.

Airbus shares were up 1.9 per cent in early session trading yesterday.

The European planemaker's coup comes as Boeing's 737 Max narrow-body - the chief global rival to the A-320 - has been idled following two fatal crashes in five months.

The US aircraft manufacturer is also struggling with the fallout from a China-US trade war that has seen sales to the Asian nation dry up, just as Airbus bolsters its position with an offer to expand production facilities in China's Tianjin.

China has become the world's most important aviation market as its fast-growing middle class spurs demand for travel.

The country has traditionally sought to keep a balance between the two Western planemakers as it seeks to jump-start manufacturing on its own soil, but the Chicago-based Boeing's order prospects have been complicated by the trade clash.

 
 
 

Vertical Research Partners' Rob Stallard said: "I would see this as part of broader trade discussions."

"For the Chinese to put tariffs on Boeing aircraft would be nuclear, but you can send messages in other ways. This tells the Americans that you have got to play nice if you want us to reciprocate," he added.

Mr Macron originally put the value of a likely order at US$18 billion. A firm order failed to materialise last year despite a second French state visit in June and the visit of a delegation of top Airbus executives to China in September.

The deal announced in Paris will include both "neos" - for new engine option - and so-called classic or CEO versions of the A-319, A-320 and A-321, though the majority will be A-320neos and A-321neos, according to officials.

China typically orders planes in large batches and allocates them to airlines later.

The latest A-320neo model has a list price of US$110.6 million and the A-350-900 sells for US$317.4 million before discounts.

Airbus' incoming chief executive officer Guillaume Faury said at the press conference on Monday that construction of the A-320s will take place both in Tianjin and Europe, adding that the deal is "a sign of confidence" from China.

Mr Macron called the transaction "an excellent signal".

China will need 7,400 new passenger and freighter aircraft in the next two decades, representing almost 20 per cent of total global demand, according to Airbus estimates.

The purchase provides a boost for Mr Faury, who takes over from Mr Tom Enders next month. Airbus sales have had one of the slowest starts in the past decade, with the planemaker registering 103 cancellations and just four new orders in the first two months.

Separately, China is looking at excluding Boeing's troubled 737 Max jet from a list of American imports as part of a trade deal with the United States, according to sources.

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A version of this article appeared in the print edition of The Straits Times on March 27, 2019, with the headline 'Airbus secures $47b jet deal with China in new blow to Boeing'. Print Edition | Subscribe