China picks Airbus in $10 billion deal for 150 planes

Dec. 5, 2005
PARIS, France, 5 Dec. 2005. Airbus signed a $10 billion deal to supply 150 single-aisle passenger jets to China on Monday, scoring its largest deal with Beijing in what is already a record year for sales for Airbus and U.S. rival Boeing.

PARIS, France, 5 Dec. 2005. Airbus signed a $10 billion deal to supply 150 single-aisle passenger jets to China on Monday, scoring its largest deal with Beijing in what is already a record year for sales for Airbus and U.S. rival Boeing.

The agreement on A320-family jets was signed during a visit to France by Chinese Premier Wen Jiabao as Airbus embarks on a six-month study of plans to build its first non-European assembly plant in China due to fast-growing demand.

The A320 family comprises four aircraft capable of seating 107 to 185 passengers and the 150 planes are worth around $9.7 billion at average list prices.

China also signed an agreement with Airbus's sister company Eurocopter, the world's largest civilian helicopter maker, to co-develop a 6-ton helicopter for the world market.

Both Airbus and Eurocopter are subsidiaries of European aerospace firm EADS, whose shares were up 2.6 percent at 32.65 euros by 1523 GMT when the main Paris market index was down 0.3 percent.

"With a total value close to $10 billion, the order ... (is) the largest single order that Airbus has ever received since it entered the Chinese market two decades ago," EADS said.

China has emerged as a major battleground between Airbus and Boeing, helping both companies to secure orders worth a record $100 billion this year despite a string of airline failures in the United States.

"The Chinese market is growing at 8 to 10 percent a year, which is the highest rate in the world, and is on course to match the United States in 10 or 20 years," EADS Co-Chief Executive Noel Forgeard said.

Monday's deal follows a Chinese commitment last month to buy 70 Boeing 737s -- the U.S. firm's equivalent to the A320 series -- as part of what a Boeing spokesman said were plans to sell 150 of the aircraft to China. That deal coincided with U.S. President George W. Bush's visit to China in November.

But Airbus is lagging behind Boeing in the lucrative market for wide-body long-haul jets in China, which agreed in January to buy up to 60 of Boeing's new 787 Dreamliner for $7 billion.

Chinese buyers are seen unwilling to let either supplier dictate terms in a fiercely competitive market in which both Boeing and Airbus offer substantial discounts to grab orders.

Forgeard said it was a "a question of when, not if" China ordered the mid-size A350 twinjet, the latest aircraft on the Airbus drawing board designed as a response to the 787.

Airbus has offered China a 5 percent share of the fuselage work for the future aircraft on a risk-sharing basis.

Wen toured Airbus's giant assembly plant for the A380 superjumbo at its headquarters in Toulouse, southwestern France, on Sunday at the start of an 11-day trip to Europe and Malaysia.

Airbus said it had agreed with Wen to look at expanding the assembly lines for its aircraft outside Europe for the first time by building a site in China to build single-aisle jets.

China's three biggest airlines -- China Southern, China Eastern and Air China -- are among six buyers for the 150 Airbus jets. Also involved are Sichuan Airlines, Shenzhen Airlines and Hainan Airlines, a carrier in which global financier George Soros has a minority stake.

Although Forgeard described the orders as "firm," Airbus officials said the deal remained a framework agreement that would not be placed in the order book until final deals were signed.

Airbus is heading for another showdown with Boeing in Australia on Wednesday, when the board of airline Qantas is expected to decide orders worth $10 billion.

In bilateral agreements with France, China also signed a 150-million euro deal for construction of its high-speed Shitai railway link, and it ordered a satellite from telecoms equipment maker Alcatel Alenia Space.

The deals follow an improvement in political ties as Paris campaigns for the European Union to drop a trade embargo on arms sales to China. Villepin described the ban as an anachronism.

Most other EU member states disagree with France on the issue, citing humans rights and security concerns. The ban was imposed after a 1989 massacre when tanks were sent into Beijing's Tiananmen Square to crush pro-democracy protests.

Forgeard denied any link between the aerospace deals and France's position on the arms embargo. He said no military technology would leak to China as a result of the new co-development deal with Eurocopter.

Source: Reuters

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