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Archive for Saturday, January 29, 2005

Boeing lands $7.2 billion deal

Chinese airlines agree to purchase 60 jetliners

January 29, 2005

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— Chinese airlines signed an agreement with The Boeing Co. on Friday to order 60 of its new fuel-efficient 7E7 jetliners in a deal the company hopes will boost orders for the plane worldwide.

The $7.2 billion agreement is the largest firm order to date for the much-hyped plane, which Boeing on Friday renamed the 787 Dreamliner.

The plane, which will be able to fly nonstop to China from a host of U.S. cities, will be delivered in time for the 2008 Olympics in Beijing, Boeing and Chinese officials said.

At a signing ceremony at the Commerce Department, U.S. and Chinese officials called the agreement an important milestone in trade relations between the two countries.

China has been criticized in recent months for a swelling trade gap with the United States. The U.S. trade deficit with China through November was more than $147 billion, the largest trade deficit the United States has with any nation.

The announcement also gives Chicago-based Boeing a boost in its competition with European rival Airbus SAS for business in China, the world's fastest-growing airplane market.

The intensity of that rivalry was illustrated Friday as China Southern Airlines -- one of the six airlines involved in the Boeing deal -- also signed an order in Paris for five Airbus A380 "superjumbos." The deal for the 555-seat A380 is worth $1.4 billion at list prices.

Boeing has emphasized the flexibility and fuel efficiency of the 787 Dreamliner, which seats 217 to 289 passengers with a range of up to 8,500 nautical miles. Boeing says the jet will be 20 percent more fuel-efficient than comparable planes now on the market.

Li Hai, president of China Aviation Supply Co., a government agency that oversees China's airlines, said in Washington that China respected both jet makers.

Chinese Ambassador Yang Jiechi, center, is flanked by China
Aviation Supply Company President Li Hai, left, and Boeing
Commercial Airplane President and CEO Alan Mulally, a graduate of
Lawrence High School and Kansas University. They announced Friday
that Chinese airlines have agreed to order 60 of Boeing's 787
Dreamliners in a deal that could be worth as much as $7.2 billion.

Chinese Ambassador Yang Jiechi, center, is flanked by China Aviation Supply Company President Li Hai, left, and Boeing Commercial Airplane President and CEO Alan Mulally, a graduate of Lawrence High School and Kansas University. They announced Friday that Chinese airlines have agreed to order 60 of Boeing's 787 Dreamliners in a deal that could be worth as much as $7.2 billion.

"We believe both Airbus and Boeing manufacture an excellent aircraft. The fact we are here today ... fully shows the confidence of Chinese airlines in Boeing's product," he said.

Alan Mulally, president and CEO of Boeing Commercial Airplanes, called the Chinese order "a real validation" of the 787's potential market, and said the order's progress would be "watched very carefully" by airlines around the world. Mulally is a graduate of Lawrence High School and Kansas University.

Aerospace industry analyst Richard Aboulafia said the Chinese order was welcome relief for Boeing, which had watched as Airbus received a host of significant orders in recent months.

"There was a real concern that (Boeing) would be increasingly marginalized, because of its aging product portfolio, and obviously the 7E7 is reinvigorating their market standing," said Aboulafia, of the Fairfax, Va.-based Teal Group.

The new plane "had a very strong appeal to the Chinese," Aboulafia said. "Right now there are very few direct flights to Beijing or Shanghai from the U.S. Most of them stop somewhere."

Other Chinese airlines ordering the planes are China Eastern, Air China, Hainan, Xiamen and Shanghai airlines.

The 787 Dreamliner is scheduled to go into service in 2008. It competes with the A350 that Airbus plans to put into service by 2010.

Friday's pact brings to 116 the number of firm orders for the 787, Mulally said, adding that Boeing has tentative orders for another 70 planes.

Boeing has said the 787 would be priced at $120 million each, although airlines usually negotiate discounts for large orders. The plane will be assembled in Everett, Wash., about 30 miles north of Seattle.

Mulally said the new order should produce a "modest" boost in jobs in the Seattle area. The more significant value is winning the confidence of China, which he said conducted among the most thorough evaluations of airplanes in the world.

While politics play a role in any action involving the two countries, "the most important thing (for an airline) is to pick an airplane that works for you and makes you successful," Mulally said.

The largest order by a single airline for the 787 was placed last spring, when All Nippon Airways of Japan ordered 50.

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