China Southern Airlines Co., Asia’s largest carrier by number of passengers, ordered 110 planes worth about $10 billion from Boeing Co., adding more efficient aircraft to its fleet with China set to become the world’s largest travel market in the next 20 years.
The Guangzhou-based carrier will buy 30 737NG and 50 737MAX models, valued at $7.24 billion at list prices, the company said in a statement Thursday. The prices are before the discounts that are typical in the industry. China Southern’s Xiamen Airlines unit also agreed to buy 30 737MAX planes for a total of $2.88 billion before discounts, China Southern said in a separate exchange filing.
“China Southern’s commitment is a solid endorsement of the popularity of the Next-Generation 737 and 737 MAX,” Ihssane Mounir, Boeing Commercial Airplanes’s senior vice president for Northeast Asia sales, said in an e-mailed statement. China Southern said the order was in line with its strategy under the country’s 13th five-year plan, which takes effect next year.
Asian air travel growth is lifting orders for planemakers Boeing and Airbus Group SE, with China forecast to surpass the U.S. as the world’s largest aircraft market within the next two decades. The country’s economic expansion is making air travel affordable to more people, prompting carriers such as China Southern and Air China Ltd. to boost their fleets. China is also forecast to become the world’s biggest air-travel market, according to Boeing.
Thursday’s deal comes nearly three months after Chinese President Xi Jinping signed an order for 300 jets worth $38 billion on a state visit to the U.S. Boeing also signed a deal to build a 737 completion center in China, partnering with Commercial Aircraft Corp. of China Ltd., known as Comac. It’s not immediately clear whether Thursday’s announcement is part of that agreement.
China Southern said it will also sell back to Boeing 16 planes — 13 757s and three 733s — 13 engines and other aerospace materials for $104 million over three years, starting in 2016. Boeing will pay costs involved, which are expected to total $1.9 million, China Southern said.
China Southern expects to take delivery of the 737NG planes between 2017 and 2018 and the 737MAX jets from 2017 to 2021. The carrier said the order boosts its capacity by 11.7 percent.
Xiamen Airlines, based in southern China’s Fujian province, will take delivery of its planes between 2018 and 2021. The carrier also plans to convert the last nine 737NG planes in another 40-plane deal signed in August 2012 to 737MAX models, under the same terms as the deal signed Thursday.
China’s total fleet of planes will surge to 7,210 by 2034 from 2,570 last year, Boeing said in August. The Chicago-based company forecast China will need 6,330 new planes worth $950 billion in the next two decades.
By BLOOMBERG NEWS December 17, 2015 in Bloomberg Business