China Southern's US$6 billion bet on the Airbus A350

By Bloomberg News, April 27 2017
China Southern's US$6 billion bet on the Airbus A350

China Southern plans to buy 20 A350 wide-body aircraft from Airbus in a deal worth about US$6 billion, providing a boost for the manufacturer amid production delays and order deferrals.

The Guangzhou-based company, which ranks as Asia’s largest airline by passenger numbers, will take delivery of the A350-900s starting in 2019, with all of the planes to be handed over by the end of 2022, according to a filing to the Hong Kong stock exchange Wednesday.

The deal for the A350s, which are priced at $311 million apiece but sell at a discount for larger orders, comes amid delivery holdups linked to a shortage of interior fittings for the model.

The biggest U.S. carriers have also cooled on the plane, with American Airlines last year deferring delivery of 22 jets by an average of 26 months and United Continental saying it may swap its order for A350-1000s to smaller aircraft.

China Southern, which recently agreed to sell a minority stake to American Airlines, is buying its first A350s as part of a push to expand the fleet to 1,000 planes by 2020 from 700 now.

Adding the twin-aisle aircraft will boost capacity by 12 percent versus the level as of Dec. 31, without accounting for retirements, according to the statement.

The carrier didn’t say if it was taking jets made available by deferrals at other operators. Delta Air Lines which has an order for 25 A350s, also said this month it was reviewing wide-body requirements amid industry over-capacity.

China Southern and its units have ordered more than $15 billion of new aircraft from Airbus and Boeing since 2015 as more people fly in the world’s most populous nation. The state-owned carrier has been adding routes to Australia, New Zealand and countries in Southeast Asia as it competes with China Eastern Airlines and Air China.

The International Air Transport Association predicts China will surpass the U.S. to become the world’s biggest air-travel market by 2024.

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