Hong Kong, China: China Eastern Airlines, one of the country’s three major carriers, said on Friday it will buy 60 Airbus A320 aircraft in a deal worth $5.39 billion to meet booming domestic travel demand.
“The Airbus aircraft will primarily be used to satisfy the increasing demand for domestic medium and short-haul passenger air transportation routes,” the airline said in a statement to the Hong Kong stock exchange.
“The purchase of the Airbus aircraft will further strengthen the company’s competitiveness in the domestic civil aviation market and increase its operational capacity in domestic routes of the company.”
The Shanghai-based China Eastern Airlines said the new aircraft will be delivered in stages from 2014 to 2017 while the purchase will be funded through bank loans.
The deal is subject to shareholder and regulatory approvals.
In the same statement, China Eastern also said it has agreed to sell 18 regional jets — 10 from Brazilian aircraft maker Embraer and eight from Canadian manufacturer Canadair — to Airbus in a bid to streamline its fleet.
The 18 jets, valued at 1.54 billion yuan ($247 million), have an average usage of around 8.2 years. They will be delivered to Airbus from 2014 to 2016.
“The disposal of the regional jets will streamline the aircraft models operated by the company, optimise the fleet structure of the company and lower the unit operation costs of the company,” China Eastern said.
The Hong Kong-listed shares of China Eastern closed up 1.88 per cent before the announcement at HKD$2.71. The benchmark Hang Seng Index ended up 0.79 per cent.
A spokesman from Airbus said he confirmed China Eastern did not immediately confirm the order but said: “We confirm that the company needs 60 type A320 aircraft, pending agreement of the Chinese authorities.”
US airline manufacturer Boeing said in April this year that China Eastern will buy 20 Boeing 777-300 extended-range aircraft, in a deal worth nearly $6 billion at list prices.
China Eastern saw its first-half net profit plunge 65 per cent year-on-year to 806.9 million yuan in August, mainly due to high fuel costs.
It also warned of challenges in the second half including the slowing Chinese economy, which the company said will “possibly hinder the future development of the group”.
An industry body said earlier this month that China will need 4,960 commercial planes over the next 20 years at a total of $563 billion, as air travel demand is expected to soar.
The Commercial Aircraft Corporation of China said the country’s air passenger volume would grow more than seven percent annually in the next two decades.
Air travel demand in China has increased in line with the country’s decades of surging economic growth that have made it the world’s second-biggest economy and seen its increasingly wealthy consumers take to the skies.
