China Eastern Airlines to buy 35 planes from Airbus and Boeing

[BEIJING] One of China's top airlines will split US$10 billion of new orders between European manufacturer Airbus and US-based Boeing, it said, as competition heats up for aviation market share in the world's second largest economy.

China Eastern Airlines said in a statement to the Hong Kong stock exchange that the lion's share of the orders, nearly US$6 billion, will go to Airbus for 20 A350 aircraft.

It will also spend close to US$4 billion on 15 Boeing 787-9 Dreamliners.

The bitter aerospace rivals have been in a fierce battle for orders in China, which is forecast to have 1.7 billion air passengers by 2034, and is poised to become the largest civil aviation market in the world in the next two decades.

China Eastern is one of China's top three airlines, operating 560 aircraft and carrying around 100 million passengers annually.

The Shanghai-headquartered company plans to use the long-haul planes for travelling between China, North America and Europe, and to replace retired aircraft.

China is now Airbus' largest market, accounting for nearly a quarter of the planes it delivered in 2015.

In March the company started construction on a new US$150 million facility in the port city of Tianjin, northern China, to deliver wide-body planes in the country.

Airbus says it has gone from 27 per cent market share in the country in 2004 to roughly 50 per cent today.

Boeing also plans to open a completion centre in China, it announced last year. The company sold 300 aircraft worth a record US$38 billion during President Xi Jinping's visit to the US in 2015.

The China Eastern orders come one day after Boeing reported an 8.8 per cent drop in first quarter earnings to US$1.2 billion, partly due to sluggish aircraft deliveries into a slowing global economy.

China Eastern's announcement late Thursday came alongside its first-quarter results, in which it said net profits rose 66.4 per cent year-on-year to 2.6 billion yuan (S$540 million).

Dai Yaxiong, an analyst at Sinolink Securities, told AFP: "China Eastern bought the wide-body aircraft mainly to invest in its international routes as outbound travel is quite hot and the gross profit margins for international flights are much higher than domestic ones."

Falling fuel prices were the main driver of the rise in profits, he said, adding: "The demand for civil aviation was also quite stable."

China Eastern Airlines shares were down 0.81 per cent to 6.10 yuan in morning trading in Shanghai on Friday.

AFP