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China, Airbus talking about potential $20-billion aircraft deal

March 19, 2014, Paris, Fra. - China is in talks to buy at least 150 Airbus passenger jets potentially worth $20-billion when Xi Jinping pays his first visit to Europe as president at the end of this month, people familiar with the matter told Reuters.


March 19, 2014
By Reuters

In a broad-ranging deal that could help reset trade relations between
China and Europe after a bumpy year, China is expected to buy more A330
passenger jets as talks advance to open Airbus’s second major factory in
the country.

The “cabin completion” plant for A330s would bolster Airbus’s
presence five years after the opening of its first final assembly plant
outside Europe in the Chinese port city of Tianjin, where Chinese
workers put together A320 jets.

 

The deal could also involve a
decision to unfreeze the purchase of 27 A330s blocked by China during a
recent row with the European Union over environmental policies.

 

“This
visit to Europe by President Xi Jinping…will certainly beneficially
promote the development of ties between China and the European Union,”
China’s foreign ministry spokesman Hong Lei said when asked to confirm
the aircraft order. “This will be an all-round development of
relations.”

 

A spokesman for Airbus, a subsidiary of Airbus Group ,
previously known as EADS, declined to comment.

 

Spokespeople for major
Chinese airlines including Air China , China Eastern and China Southern
all declined to comment.

 

Both France and Germany are anxious to
establish good ties with China’s leader and announcements on the Airbus
deal package could be made in both countries, European officials said.

 

The package could also include some A320 and A350 aircraft, people familiar with the matter said.

 

The
sources stressed that the final size of the deal could change and would
depend on last-minute talks. Previous state visits have included tough
negotiations on the sidelines.

 

The sources declined to be named as the matter was confidential.

 

China
remains the world’s fastest-growing aviation market despite a recent
slowdown in its economy, with a surge in outbound travellers fuelling
the expansion. One in four people from China travelled by plane last
year, with that number set to rise to virtually the whole active
population in the next two decades, Airbus says.

 

Airbus faces
stiff competition from U.S. arch-rival Boeing over such deals,
especially for wide-body jets like the A330, an established model that
Airbus is hoping to revitalise as Boeing increases output of its newer
787 Dreamliner.

 

Both companies are offering their aircraft at steep discounts to win China’s business, industry sources say.

Airbus
is promoting a new “regional” version of the A330 aimed at China’s
crowded domestic market, but Boeing hopes to persuade airlines to choose
its alternatives.

 

Boeing also appears to have deals with China for similar quantities of jets that are not yet announced, industry sources said.

 

Beijing
has tended in the past to balance purchases of aircraft from each of
the two main foreign suppliers, especially when buying popular
narrow-body models like the A320 and Boeing 737 that are most used on
its crowded domestic network.

 

Recently, China has shown signs of
decoupling strategic items like air transport from diplomatic visits,
with more and more airlines announcing their deals separately and new
Chinese leasing companies also making a significant mark.

 

However,
France has expressed optimism over its ties with China in nuclear
energy and aerospace – diplomatic code for possible deals during the
March 25-27 visit.

 

“We will see how many aircraft Airbus sells at the end of the visit,” a French official said this week.

 

Toulouse-headquartered Airbus bases most of its operations in France and Germany.

 

Xi
plans to visit both countries, starting with France where other
important industrial deals are expected to be signed, celebrating 50
years since President Charles de Gaulle became the first Western leader
to recognise China.