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Air China, Shenzhen To Buy 100 Airbus 320 Aircraft For $8.9 Bln At Basic Prices

AirChina Airbus 052813

Air China Ltd (AIRC.L,AIRYY.PK) and its subsidiary Shenzhen Airlines have agreed to purchase 100 Airbus 320-series aircraft from Paris-based Airbus Co., a unit of European Aeronautic Defence and Space Co. or EADS NV (EADSF.PK,EADSY.PK), for $8.85 billion, the Chinese carrier said in a regulatory filing with the Hong Kong Stock Exchange.

On May 24, Air China and its unit Air China Import and Export Co., Ltd inked the Purchase Agreement with Airbus. Shenzhen Airlines also entered into the agreement on the same day.

The aircraft basic price, comprising the airframe price and engine price, for the Air China order is about $5.37 billion, subject to price adjustment. The company expects to take delivery of the aircraft in stages from 2014 to 2020.

Shenzhen Airlines has agreed to purchase 40 Airbus 320-series aircraft for a basic price of $3.48 billion and expects to take delivery of the aircraft in stages from 2016 to 2020.

The Airbus Company has granted Air China and Shenzhen Airlines price concessions in the form of credit memoranda that may be used towards the final price payment or for the purpose of purchasing goods and services from the Airbus Company.

The extent of the price concessions granted to Air China and Shenzhen is comparable with the price concessions obtained in the previous aircraft purchases from Airbus in 2010. The aggregate consideration is payable by cash in installments.

Air China and Shenzhen will fund the purchase through cash generated from the company's business operations, commercial bank loans and other financing instruments.

Air China said the transaction will expand the overall fleet capacity of the group and optimize its fleet structure.

Without accounting the adjustments that may be made to the fleet based on marketing condition and aging, the transaction is expected to strengthen the fleet capacity of the group with an increase of 15.9 percent based on the number of available tonne kilometers of the group as at December 31, 2012.

According to Air China, the deal is in line with the market requirements for the company, and will expand the fleet capacity of Shenzhen Airlines in south China.

The company expects that the Airbus aircraft will deliver more cost efficient performance and provide more comfortable services to passengers.

Further, the airline said the Airbus Company has agreed to buy back from the Chinese company 6 A340-series aircraft in advance.

Air China shares fell 0.5 percent on the Hong Kong Stock Exchange Tuesday to HK$6.63.

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