Airline swaps 787s for smaller 737s
Source: Bloomberg News |
October 19, 2011, Wednesday
|
Print Edition
Print Edition
CHINA Eastern Airlines Corp has dropped an order for 24 Boeing 787 Dreamliners in favor of 45 smaller B737s after the larger jet's delivery was delayed and a weakening economy hurt demand for long-haul air travel.
The carrier will pay "significantly" less than the 2008 catalog price of US$3.3 billion for the B737s and it will get a "certain amount of indemnity" from Boeing, the airline said in a statement, without elaboration. The basic prices for the B737 and B787 orders are "comparable," it said. The Shanghai-based airline is also returning five Airbus 340-300s next year to Airbus SAS in exchange for 15 smaller wide-body A330s.
"Airlines worldwide are adjusting their fleet expansion strategies as the weakening global economy hurts air travel," Luo Zhuping, China Eastern's board secretary, said by phone. "We are making swift moves to serve domestic demand that is still robust at the moment."
China's second-biggest carrier cited delays to the B787, which was delivered to its first customer three years late, as a reason for canceling the orders. The airline is also curtailing international expansion after struggling to compete with Air China and China Southern Airlines Co on overseas routes.
"The change to smaller aircraft will be good for China Eastern if the carrier's domestic market can absorb the additional capacity," said Shirley Lam, an analyst at Nomura International Hong Kong Ltd. "Still, China Eastern will be affected if China's economic growth slows."
China Eastern will receive the A330s from 2013 to 2015.
China Eastern chose the A330, which carries 250 to 300 passengers, as the "near-term solution compared to the 787," which seats up to 290, said Stefan Schaffrath, an Airbus spokesman in France.
The switch doesn't indicate shifting demand or travel patterns since the carrier is "just swapping wide-bodies" instead of canceling, said Rob Stallard, an analyst at RBC Capital Markets in New York.
The B737-800s, to be delivered from 2014 to 2016, will boost China Eastern's flight capacity by 8.7 percent.
The carrier will pay "significantly" less than the 2008 catalog price of US$3.3 billion for the B737s and it will get a "certain amount of indemnity" from Boeing, the airline said in a statement, without elaboration. The basic prices for the B737 and B787 orders are "comparable," it said. The Shanghai-based airline is also returning five Airbus 340-300s next year to Airbus SAS in exchange for 15 smaller wide-body A330s.
"Airlines worldwide are adjusting their fleet expansion strategies as the weakening global economy hurts air travel," Luo Zhuping, China Eastern's board secretary, said by phone. "We are making swift moves to serve domestic demand that is still robust at the moment."
China's second-biggest carrier cited delays to the B787, which was delivered to its first customer three years late, as a reason for canceling the orders. The airline is also curtailing international expansion after struggling to compete with Air China and China Southern Airlines Co on overseas routes.
"The change to smaller aircraft will be good for China Eastern if the carrier's domestic market can absorb the additional capacity," said Shirley Lam, an analyst at Nomura International Hong Kong Ltd. "Still, China Eastern will be affected if China's economic growth slows."
China Eastern will receive the A330s from 2013 to 2015.
China Eastern chose the A330, which carries 250 to 300 passengers, as the "near-term solution compared to the 787," which seats up to 290, said Stefan Schaffrath, an Airbus spokesman in France.
The switch doesn't indicate shifting demand or travel patterns since the carrier is "just swapping wide-bodies" instead of canceling, said Rob Stallard, an analyst at RBC Capital Markets in New York.
The B737-800s, to be delivered from 2014 to 2016, will boost China Eastern's flight capacity by 8.7 percent.
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