International

China buys 50 Airbus jets worth over $4 billion during Merkel visit

Merkel meets with Chinese President Hu Jintao at the Great Hall of the People in Beijing.

BEIJING: China signed an agreement with Germany for 50 Airbus planes worth over $4 billion during Chancellor Angela Merkel’s visit to Beijing on Thursday, the first significant order since a dispute between Beijing and Europe over emissions trading.

The dispute between China and the European Union has frozen earlier deals worth up to $14 billion.

China’s ICBC Leasing and Airbus, whose parent company is Franco-German-led aerospace group EADS, signed the deal for 50 Airbus A320-family planes and another agreement about Airbus plane assembling in China, state news agency Xinhua said.

Xinhua put the value of the deal at $3.5 billion but at published list prices, it could be worth $4.6 billion, according to a breakdown of models supplied by Airbus.

China regularly orders aircraft in large batches timed to coincide with high-level contacts with U.S. or European leaders, but the deal fell short of European expectations of a 100-plane order circulating on the eve of Merkel’s trip.

Airbus insisted it was satisfied with the deal, which includes the first Chinese order for its fastest-selling model, a revamped version of its narrow-body plane known as A320neo.

“In the current economic environment every deal is a good deal. What counts is: Aviation is and remains a growth industry, with Asia and China being significant drivers,” a company spokesman said.

Officials said Airbus and China had also reached a $1.6 billion framework deal to extend an Airbus A320 assembly line at Tianjin near Beijing.

Merkel’s schedule includes a visit to the industrial port city where Airbus has just finished assembling the 100th jet out of parts shipped from Europe.

Work at Airbus’s first non-European assembly plant is carried out under an agreement that runs out in 2016. Airbus plans a second offshore plant in Mobile, Alabama.

ICBC’s decision to order the A320neo suggests Tianjin will have a stake in assembling the latest items in Airbus’s catalogue, designed to offer 15 percent fuel savings once the revamped narrow-bodies become available from mid-decade.

Diplomats said France, where Airbus is based, would be keen to oversee the sale of more aircraft to China during a visit by President Francois Hollande penciled in for later this year.

Airbus estimates China will need 4,270 new passenger and cargo aircraft in the next 20 years, dominated by narrow-body aircraft like the A320 or its U.S. rival Boeing’s 737.

Such short-range jets have been spared any fallout from the row between China and the European Union over airline emissions as China seeks to keep pace with domestic demand and develop the skills required for its own fledgling aircraft industry.

China continues, however, to block the purchase of some 35 larger Airbus aircraft to protest against EU plans to enforce a carbon reduction scheme that opposing nations deem unfair.

China aims to enter the jet market with its 150-seat Comac C919 jetliner from 2016, but is expected to remain a significant importer of Western aircraft for decades.

Europe’s Airbus currently has a 48 percent market share against Boeing in China, with the world’s second-largest economy making up 20 percent of its worldwide deliveries.

Despite the China deal and a Philippines order earlier this week, Airbus lags Boeing in sales so far this year and is expected to slip from the top of the industry’s rankings as Boeing enjoys a resurgence following industrial delays.

 
A version of this article appeared in the print edition of The Daily Star on August 31, 2012, on page 6.

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