Air China to buy Airbus, Boeing jets worth US$2b
Wednesday, March 21, 2007
FLAG carrier Air China Ltd said yesterday it would set aside over US$2 billion in this year, mainly to buy Boeing and Airbus jets, as executives said they hoped Beijing would inject cash into an ailing aviation sector.
But executives were quick to point out that they had received no formal word of such an injection — reported widely in Hong Kong and Chinese media in past months to amount to some 10 billion yuan (US$1.3 billion).
Air China will earmark 16.9 billion yuan for capital expenditure (capex) this year, of which 11 billion yuan would be used for fleet expansion. The capex figure is down slightly from 19.5 billion yuan last year.
Air China the most profitable of the country's three biggest airlines, which includes China Eastern Airlines Corp and China Southern — intends to keep expanding its fleet.
It operated a fleet of 207 planes at the end of last year, including 141 Boeing and 50 Airbus aircraft.
Executives welcomed news that the country was developing its own long-haul jet, hot on the heels of creating its own regional plane, the controversial ARJ21.
"Developing a strong aviation industry is important to China," chairman Li Jiaxiang said.
"A big country needs big planes."
China's cabinet recently approved a plan to develop the country's own large passenger jets — a move that could challenge the dominance of Boeing Co and Airbus.
Shares in Air China, which have surged 41 per cent this year through Monday, ended the morning session weaker by 0.51 per cent at HK$5.91, underperforming the market's meagre gain.
On Monday, Air China posted an 11.7 per cent rise in last year's profit to 2.69 billion yuan, according to international accounting standards.
Operating revenue grew by 17.4 per cent to 44.9 billion yuan, while total expenses rose 22.5 per cent to 42.4 billion yuan due to increases in the price and consumption of jet fuel.
However, the airline said easier oil prices in the second half of the year brought some relief.
"Last year was a critical year for the company," said company chairman Li Jiaxiang, highlighting its A-share listing in Shanghai which had helped raise the funds used for the company to expand its fleet by 31 aircraft.
Internally, Air China added that the firm would focus on improving its cargo business this year. It booked 4.04 billion yuan of cargo revenue for the year, up 8.75 per cent.
In January, aviation executives told Reuters Air China planned to set up a cargo venture with Hong Kong's Cathay Pacific Airways Ltd this year, to expand an alliance into the fast-growing air freight arena.
The company — which has won official approval to increase its stake in Cathay Pacific to 17.5 per cent — would hold 50 per cent of the tie-up and Cathay the remainder.
Air China said it carried 33.97 million passengers last year, up 14.2 per cent, giving a passenger load factor, a measure of how full its flights were, up 1.9 percentage points to 75.9 per cent.
During the year, the company introduced 35 new routes and international services from Beijing to Ho Chi Minh City, Delhi, Madrid and Sao Paulo. Li expects the 2008 Olympic Games in Beijing to boost the airline's business. Reuters
But executives were quick to point out that they had received no formal word of such an injection — reported widely in Hong Kong and Chinese media in past months to amount to some 10 billion yuan (US$1.3 billion).
Air China will earmark 16.9 billion yuan for capital expenditure (capex) this year, of which 11 billion yuan would be used for fleet expansion. The capex figure is down slightly from 19.5 billion yuan last year.
Air China the most profitable of the country's three biggest airlines, which includes China Eastern Airlines Corp and China Southern — intends to keep expanding its fleet.
It operated a fleet of 207 planes at the end of last year, including 141 Boeing and 50 Airbus aircraft.
Executives welcomed news that the country was developing its own long-haul jet, hot on the heels of creating its own regional plane, the controversial ARJ21.
"Developing a strong aviation industry is important to China," chairman Li Jiaxiang said.
"A big country needs big planes."
China's cabinet recently approved a plan to develop the country's own large passenger jets — a move that could challenge the dominance of Boeing Co and Airbus.
Shares in Air China, which have surged 41 per cent this year through Monday, ended the morning session weaker by 0.51 per cent at HK$5.91, underperforming the market's meagre gain.
On Monday, Air China posted an 11.7 per cent rise in last year's profit to 2.69 billion yuan, according to international accounting standards.
Operating revenue grew by 17.4 per cent to 44.9 billion yuan, while total expenses rose 22.5 per cent to 42.4 billion yuan due to increases in the price and consumption of jet fuel.
However, the airline said easier oil prices in the second half of the year brought some relief.
"Last year was a critical year for the company," said company chairman Li Jiaxiang, highlighting its A-share listing in Shanghai which had helped raise the funds used for the company to expand its fleet by 31 aircraft.
Internally, Air China added that the firm would focus on improving its cargo business this year. It booked 4.04 billion yuan of cargo revenue for the year, up 8.75 per cent.
In January, aviation executives told Reuters Air China planned to set up a cargo venture with Hong Kong's Cathay Pacific Airways Ltd this year, to expand an alliance into the fast-growing air freight arena.
The company — which has won official approval to increase its stake in Cathay Pacific to 17.5 per cent — would hold 50 per cent of the tie-up and Cathay the remainder.
Air China said it carried 33.97 million passengers last year, up 14.2 per cent, giving a passenger load factor, a measure of how full its flights were, up 1.9 percentage points to 75.9 per cent.
During the year, the company introduced 35 new routes and international services from Beijing to Ho Chi Minh City, Delhi, Madrid and Sao Paulo. Li expects the 2008 Olympic Games in Beijing to boost the airline's business. Reuters
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