Abu Dhabi, UAEMonday 14 October 2019

Airbus bags $35bn jets deal from China in a blow to embattled Boeing

The deal was secured during a state visit by President Xi Jinping to Paris

French President Emmanuel Macron and Chinese President Xi Jinping applaud as President of Airbus, Guillaume Faury and Chairman of China Aviation Supplies Company, Jia Baojun, shake hands at the signing ceremony. Reuters
French President Emmanuel Macron and Chinese President Xi Jinping applaud as President of Airbus, Guillaume Faury and Chairman of China Aviation Supplies Company, Jia Baojun, shake hands at the signing ceremony. Reuters

Airbus secured a $35 billion (Dh128.5bn) jet deal from China during a state visit by President Xi Jinping to the French capital, dealing a fresh blow to Boeing as it grapples with the grounding of its best-selling jet.

The mammoth order consists of 290 narrow-body planes A320 series and 10 wide-bodies A350, 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 2018 during a trip to Beijing.

The Airbus coup comes while Boeing’s 737 Max narrow-body – the chief global rival to the A320 – has been idled following two fatal crashes in five months. The US plane manufacturer is also struggling with the fallout from a China-US trade war with sales to the Asian nation drying up, just as Airbus bolsters its position with an offer to expand production facilities in 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 plane companies as it seeks to jump-start manufacturing on its own soil, but Boeing’s order prospects have been complicated by the trade clash.

“I would see this as part of broader trade discussions,” said Rob Stallard at Vertical Research Partners. “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.”

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

The deal announced in Paris will include both neo – for new engine option – and so-called classic or CEO versions of the A319, A320 and A321, although the majority will be A320neos and A321neos, according to officials. China typically orders planes in large batches and allocates them to airlines later.

The latest A320neo model has a list price of $110.6 million and the A350-900 sells for $317.4m before discounts.

Airbus’s incoming chief executive, Guillaume Faury, said that construction of the A320s will take place both in Tianjin and Europe, adding that the deal is “a sign of the 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 Tom Enders in April. Airbus sales have had one of the slowest starts in the past decade, with the plane maker 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 exports it would buy as part of a trade deal with the US, sources have said.

Updated: March 26, 2019 01:25 PM

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