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Friday, July 8, 2022

Airbus secures mega-order from four Chinese airlines

Airbus has received an enormous order from four Chinese airlines for 292 single-aisle A320 family aircraft.

The list price for the transaction involving Air China, China Eastern, China Southern, and Shenzhen Airlines is nearly $37 billion (€35,4 billion).

Despite the fact that the pandemic has paralyzed air traffic in China, the demand for aircraft remains immense.

For Airbus, these orders, which have not yet been finalized, “illustrate the positive recovery momentum and bright prospects of the Chinese aviation market.”

China Eastern will acquire 100 aircraft of the A320neo Family, while China Southern will acquire 96 of the same model. Air China and its subsidiary Shenzhen Airlines will each acquire 64 A320neo aircraft.

The airlines did not specify the A320 family models involved, but according to a source with knowledge of the situation, these include larger-capacity A320s and A321s, as well as some smaller A319s.

All deliveries are scheduled between 2023 and 2027, suggesting that the contract was negotiated a long time ago, as Airbus’s single-aisle aircraft are in high demand and delivery slots are becoming scarce.

Despite being weakened by the pandemic, airlines around the world are attempting to prepare for the expected doubling of global air traffic between 2019 and 2029. In order to accomplish this, they are planning to replace their fleets with more modern aircraft that consume less fuel and emit less CO2.

In spite of the fact that air traffic in China remains atrophied due to the country’s stringent health regulations, it is expected to explode over the next few years. Airbus predicts that the number of aircraft in service in China will triple by 2040 to nearly 11,000 aircraft.

The European aircraft manufacturer’s order book for A320 family aircraft exceeded 8,000 at the end of May.

Guillaume Faury, the executive chairman of Airbus, expressed optimism when he was asked a few months ago about the absence of Chinese orders for several years despite the likelihood of long-term growth.

In front of a handful of journalists, he stated, “This order book will need to be updated so that airlines can regain visibility.”

According to a source with knowledge of the situation, this mega-order reinforces the European aircraft manufacturer’s goal to increase its production rate to 75 A320 aircraft per month by 2025.

Some suppliers, including engine manufacturer Safran, have expressed concerns about the appropriateness of such rates due to the required investment and the anticipated long-term demand.

Airbus had drastically reduced production during the pandemic and has begun a gradual increase, with 45 A320 Family aircraft produced per month by the end of 2021. It anticipates producing 65 per month by the summer of 2023 despite recent supply tensions and occasional hiring difficulties.

China has not yet certified its national aircraft manufacturer Comac’s C919 jet, which is intended to compete with the Airbus 320 and Boeing 737 MAX. According to Comac, Chinese companies have ordered 815 of the aircraft.

A setback for Boeing and its 737 MAX, which Beijing declared airworthy again in December, this order was announced a few days before the Farnborough International Airshow in England, a traditional occasion for aircraft manufacturers to announce this type of order.

With its single-aisle competitor to the A320, the American aircraft manufacturer is counting on the vast Chinese domestic market to help it regain its footing. The four firms that announced the order for Airbus on Friday are already MAX customers.

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