Exclusive: China’s huge Airbus order padded by old or incomplete deals – source
PARIS (Reuters) – A landmark order from China for 300 Airbus jets signed during a state visit last week was bolstered by repeat announcements of dozens of existing deals and advance approval for deals that have yet to be struck, two people familiar with the matter said.
Echoing an umbrella order for 300 Boeing jets awarded during a visit to Beijing by U.S. President Donald Trump in 2017, the headline figure for the new “framework order” for European jets was partly driven by political considerations, the people said.
The Airbus deal would have been worth some $35 billion at list prices but the amount of new business is lower, they added. Duplicate announcements included a deal for 10 A350 aircraft to an unnamed buyer, which represents a repeat announcement of an order for 10 jets by Sichuan Airlines at an air show last year.
The disclosure takes some of the shine off an announcement widely regarded as the economic highlight of a trip to Europe by Chinese President Xi Jinping. Nonetheless the deal marked a return to the aircraft market by China’s state buying agency after a pause of over a year during global trade tensions.
The overall figure of 300 was introduced late in the process and after Xi’s visit was underway, although plane orders typically take months to negotiate, one of the people said.
Airbus declined to comment on detailed orders but left open the possibility that the large total contained gaps.
The agreement “creates the approval framework for aircraft ordered by Chinese airlines, be it existing orders or future orders,” a spokesman said.
TRADE TIES
Airbus shares fell 0.7 percent on Tuesday, extending earlier losses after Reuters reported gaps in the China deal. Airbus’ stock had risen almost two percent after China’s mega-order, signed in Paris on March 25 in front of Xi and French President Emmanuel Macron.
Industry sources say major planemakers play by similar rules when selling to China, where they face a two-tier system of negotiations with airlines within a framework of state-backed umbrella deals that may be influenced by geopolitics.
But the headline figures for new orders during high-profile diplomatic visits, which for several years hovered around 150 aircraft for both Airbus and Boeing, have increased as trade ties between Washington and China go through highs and lows.
In November 2017, months before a trade war erupted with the imposition of tariffs, China announced an order for 300 Boeing jets during a visit to Beijing by U.S. President Donald Trump.
Analysts expressed doubts at the time over how much of that was new business, and said part of the announcement represented renewed government support for deals already on Boeing’s books.
“The most recent Airbus and Boeing deals followed a similar pattern,” said a China aircraft industry specialist.
Boeing is now seen as next in line to secure a 200-300-plane order as part of a possible economic truce being negotiated to end the trade war, but the recent grounding of one of its jets has cast uncertainty over the timing of the deal.
Boeing and Airbus compete fiercely to serve the needs of the world’s fastest-growing airplane market, while bracing for future competition from China’s own aerospace industry.
Analysts say Beijing tends over time to balance U.S. and European purchases, though recent years have seen the rise of a growing number of independent Chinese leasing companies and an increase in autonomous decision-making by several airlines.
(Reporting by Tim Hepher, Additional reporting by Marine Pennetier; Editing by Sudip Kar-Gupta and Richard Lough)
