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China to Buy A380s And The Renamed 787
Author:admin    NewsSource:admin    Hits:    Update Time:2007-7-2

Both Airbus and Boeing have made market breakthroughs in China, but it's the Boeing sales team that gets the biggest bragging rights.

Boeing Commercial Airplanes President and CEO Alan Mulally and China's ambassador to the U.S., Yang Jiechi, were set to sign a preliminary agreement in Washington on Jan. 28 for the sale of 60 7E7-8 mid-sized jets to six Chinese carriers. At list prices, the deal would be worth $7.2 billion and is believed to be the single largest order placed by China. It is also the largest transaction so far for the 200-300-seat twinjet, which was launched last April. Total orders and commitments stand at 186.

In addition, Boeing is confirming long-standing rumors that the "E" for "efficiency" in the new airplane's name was not going to last. The company will revert to its traditional naming cycle and call the new aircraft the 787.

Also on Jan. 28, French Transport Minister Gilles de Robien was set to host a signing ceremony in Paris in which China Southern Airlines (CSA) would pledge to buy five of Airbus' 555-seat double-decker A380s valued at $1.4 billion. The English-language China Daily said China Southern Chairman Liu Shaoyong would take part in the ceremony. Airbus launched the A380 slightly more than four years ago and has collected 139 firm orders, plus a recent commitment for 10 aircraft from UPS. With its signing, CSA raises that total to 154 orders and commitments.

BOTH MANUFACTURERS have been counting on the Chinese for months. The Europeans were hoping for an announcement during French President Jacques Chirac's visit with Chinese President Hu Jintao in Beijing last fall that the A380 would score, but had to settle for more traditional sales of A330s and A319s (AW&ST Oct. 18, 2004, p. 35).

Similarly, Boeing was looking for a 7E7 order from China to help it meet a year-end goal of 200 sales. It didn't meet that pledge although officials say that's only because their airline customers control the timing for such announcements. However, the Chinese 787 commitment makes it less likely that Chinese carriers will be purchasing the A350, the A330 derivative Airbus is marketing as an antidote to the 787.

The orders coincide with Asia's biggest holiday period, the Lunar New Year, which generates peak travel. This year's festivities, which begin Feb. 9, will be marked by the first China-Taiwan direct flights. The charters are a limited step in improved relations between the two countries. China Southern is expected to make the first touchdown in a flight from Guangzhou to Taiwan on Jan. 28 and is hoping to build a long-term relationship by partnering with Taiwan's China Airlines during this holiday season.

China Southern is likely to be a major recipient of the 787s, although a Boeing official said no distribution schedules are available. Also receiving 787s are China's other two government-managed carriers, Beijing's Air China and Shanghai's China Eastern, plus three more independent carriers, Hainan Airlines, Xiamen Airlines and Shanghai Airlines.

ALL SIX ARE TO RECEIVE AT LEAST ONE aircraft by the opening of the 2008 Summer Olympics in Beijing. That event--to begin on the eighth day of the eighth month of 2008--underscores the importance of the number eight in Chinese culture.

Rumors had Boeing ditching the "E" for "efficiency" in its worldwide marketing campaign for the 7E7 in favor of 787 if use of an "8" would help the Chinese sale. That logic ignores the fact that Boeing has sold more airplanes in China than any foreign manufacturer and none had eights in their names. Nonetheless, when asked about it last week, a Boeing official quoted CEO Mulally as noting: "In many Asian cultures the number eight represents good luck and prosperity."

Still, reverting to its traditional numerical naming pattern that marches up the 700 scale by tens has other advantages. One problem with using the "E" designation is how to name Boeing's next airplane. Would it be the 7F7? Company officials roll their eyes at the word play prospects for that one.

The A380 sale comes as China Southern continues its remarkable growth. In its 2003 rankings (the most recent available), the International Air Transport Assn. places CSA 21st among all airlines in terms of passengers carried. Air China is 25th and China Eastern, 38th. CSA is the eighth-largest carrier in the Asia-Pacific region.

Interestingly, Beijing-based Air China was not selected by national authorities to be the first A380 customer, even though it is China's de facto flag carrier. The country's only 747 operator, Air China is expected to place a similar-sized order for the A380 eventually. China Eastern is not expected to be an early A380 customer.

WHERE THE A380S will be put into service is unclear.

As China's domestic market continues to thrive, CSA is using 777s on its Guangzhou-Beijing route, and airline officials report good load factors. If it is used domestically, CSA's A380 is likely to be applied on such high-demand, 3-hr.-plus routes.

While the main trunk routes are natural candidates for the A380, other choices might surprise outsiders. One possibility is for CSA to use it to serve Urumqi in western China's barren Xinjiang Province, a hub for China's own Muslim population and its main connector to such destinations as Dubai, Islamabad, Tashkent and Almanty. Flights to Moscow also are hubbed through Urumqi.

CSA faces contradictory challenges. While it is growing handsomely in its home market, China's ranking as the world's fastest-growing international destination has put CSa's international marketing team in the spotlight. The carrier has a good news/bad news situation in its own backyard. Guangzhou, China's largest southern industrial city, opened the new Baiyun International Airport last summer, giving CSA a sparkling home base. But Baiyun also has been attracting some of the world's biggest airlines, putting new pressure on CSA to perform. Where just six years ago, Guangzhou received very little foreign attention, it's a hot spot now. Carriers currently operating there, or set to open flights this year, include Lufthansa, Finnair, Air France/KLM, United Airlines, Northwest Airlines, Malaysian Airlines, Thai Airways International, Korean Air, Asiana, Singapore Airlines and Vietnam Airlines.

TO HELP STRENGTHEN its marketing presence, China Southern is likely to join the SkyTeam alliance in 2006.

Meanwhile, CSA has signed code-sharing agreements with Air France/ KLM, Vietnam Airlines, Delta Air Lines and Korean Air to make them allies rather than opponents on its home turf. It also is expanding its international comfort standards. For instance, it has ordered four A330s with fully reclining cocoon-style sleeper beds in first-class.

Where they will be dispatched hasn't been announced, but European destinations seem favored. Still, even though CSA has an active international public relations arm, its marketing budget is small. So it will be a challenge to make the jump from filling mid-sized 777s and A300/A330s with 250-350 seats to a double-decker long-haul A380 carrying about 500 passengers.

International routes for the A380 are likely to include Los Angeles, Sydney/Melbourne, Paris, Amsterdam and Ho Chi Minh City.

 

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