Shenzhen carrier switches allegiances
By Chen Hong (China Daily)
Updated: 2005-01-24 14:45

SHENZHEN: Local carrier Shenzhen Airlines, previously a loyal client of Boeing, placed an order for 20 aircraft worth US$1 billion from Airbus after negotiations with Boeing fell through over pricing, as reported in the Oriental Morning Post.

The aircraft are part of purchasing contracts signed between the China National Aero-Equipment Import-Export Group and Airbus for a total of 23 Airbus A320-series planes in Beijing on December 6, the Shanghai-based newspaper quoted an insider as saying.

A Shenzhen Airlines spokesman confirmed the news but did not offer further details. "It's true. But it's not us who authorized the newspaper to publish the news. We don't currently have a timetable for an announcement (of the plane order)," the spokesman told China Daily.

The newspaper said Shenzhen Airlines had intended to keep buying aircraft from Boeing because a single model of plane helps the small carrier save operational, maintenance and training costs.

However, Boeing would not compromise on price as it wrongly assumed the airline company would definitely buy from them. As a result, Shenzhen Airlines decided to terminate negotiations with Boeing and turn to the company's rival, the spokesman added.

The local carrier, with total assets of just 6 billion yuan (US$727.2 million), compared to Air China's 51.5 billion yuan (US$6.2 billion), claims to have turned a profit for eight consecutive years amid steeper competition in China's aviation industry.

Set up in 1992 by five companies led by Guangdong Holdings Group, a Guangzhou-based conglomerate, Shenzhen Airlines now has a fleet of 26 Boeing 737-series aircraft operating from its hub of Shenzhen and three sub-bases in South China's Guangzhou and Nanning and East China's Wuxi.

According to the company insider, the newly-ordered aircraft may be assigned to the Guangzhou sub-base, now operating just two planes, since the company has decided to develop this market.

Both Airbus and Boeing said they have not been informed of the issue and declined to comment.

Airbus Beijing's spokesman told China Daily that it has maintained a good relationship with most of China's carriers and will definitely not neglect Shenzhen Airlines.

Airbus is optimistic about its China prospects and has set a target of 50 per cent market share from the current 32 per cent, compared with a 7 per cent stake 10 years ago, the Airbus spokesman said.

Last year, Airbus, who overtook Boeing to become the world's largest aircraft manufacturer in 2003, received record orders of 81 aircraft from its Chinese clients. Boeing got just 15.

But Boeing remains a strong player in the local market with a 63 per cent share at the end of 2004.

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