China in talks for $20bn Airbus deal

March 20, 2014 - 8:59:03 am

Visitors look at Airbus A350-900 passenger aircraft models at an expo in Beijing.

Beijing: China is in talks to buy at least 150 Airbus passenger jets potentially worth $20bn when Xi Jinping pays his first visit to Europe as President at the end of this month, people familiar with the matter said.

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.

A spokesman for Airbus, a subsidiary of Airbus Group, previously known as EADS, declined to comment. Chinese government officials were not immediately available to comment and 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, however, 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.

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 US 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 narrowbody 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. Reuters