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China Southern to buy 45 Boeings at $3 billion


12 June, 2005: China Southern Airlines and its subsidiary Xiamen Airlines are planning to acquire 45 Boeing planes for $3 billion, banking on an increase in air travellers in Chinese mainland.

The airline, which is one of the largest by fleet size, would buy 12 Boeing 737-700 aircraft and 33 737-800s. Xiamen Airlines would acquire 15 737-800s and the deliveries of the all aircraft are slated to take place between 2006 and 2008.

The airline has received approvals from its board and also from the China Southern Group, the main promoters of the company. China Southern Airlines intends to take loans from commercial banks for raising part of the required amount, while the rest would be from internal accruals.

The company expects the purchase of the short-haul aircraft to increase its load capacity by 15 per cent. The airline ferried 3.63 million passengers in April, an increase of 43.8 per cent carried during the same period of previous fiscal.

The list price for a 737-700 was given as $50.5 million to $59 million, with the 737-800 running at $61.5 million to $69.5 million. China is expected to sharply increase aircraft orders to cope with anticipated booming tourist traffic in the lead-up to the 2008 Olympic Games in Beijing.

Although Boeing currently has a 62 percent market share in China, it has lost ground in recent times to Airbus Industrie. Airbus intends to increase its share of jets in the Chinese fleet to 50 per cent in the near future from the present 25 per cent.

The Chinese aviation sector is hotting up as more and more carriers are commencing operations to the mainland. Spain's Air Europa, British Airways, US-based Continental Airlines, Northwest Airlines and United Airlines are some of the airways that have launched services to the country in the last couple of months.

China's fast-growing economy, its attraction to foreign capital and business opportunities as Beijing is to host the 2008 Olympics are believed to be reasons for this.


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