Air China to purchase 18 Airbus jets

Order indicates strong recovery of the domestic civil aviation market

Air China will buy 18 Airbus aircraft from AFS Investments Inc, a subsidiary of US aircraft lessor GECAS, in a deal worth about $2.24 billion, based on open-market prices, the State-owned carrier said.

The deal includes purchase of five A320-200neos and 13 A321200LRs. The actual transaction price is expected to be lower than the open-market prices with concessions, and the carrier will pay via cash installments.

The payment will not have any significant impact on its cash flow and operations. The favorable exchange rate and the low interest rate for financing at the moment will be beneficial to the company in control of procurement costs, Air China said in a statement to the Shanghai Stock Exchange.

The current order is the first purchase of Airbus aircraft by a Chinese carrier since 2019 and indicates the strong recovery and growth potential of China’s domestic air travel market after the COVID-19 pandemic, said industry experts.

The aircraft are expected to be delivered to AFS Investments in batches before 2022 ahead of the actual deliveries to the airline. GECAS, one of the biggest aircraft lessors globally, operates the air finance business of US-based General Electric.

With the pandemic getting under better control in China, the recovery in the domestic air travel market has been much better than that in the international market, with the utilization rate of single-aisle airplanes picking up. The fresh aircraft purchase can help the carrier to increase its capacity in the long term as it operates from the two airports in Beijing and Chengdu, Sichuan province, Air China said.

The additional aircraft will expand the capacity of its fleet by 2.12 percent. The purchase does not factor in any possible elimination of aircraft because of the existing market environment and age of the aircraft, according to the statement.

“Due to the pandemic, fleet expansion was stagnant last year. Demand was suppressed but it is not disappearing. China has a huge potential demand for new aircraft, and capacity expansion is inevitable for Chinese carriers. The purchase will help prepare for recovering domestic and international markets in the future,” said Zou Jianjun, a professor of the Civil Aviation Management Institute of China.

In February, Air China’s passenger transport capacity rose by 21 percent on a yearly basis. Passenger turnover volume rose by 44.9 percent on a yearly basis, according to the company.

Meanwhile, online searches for flight tickets between May 1 and May 5, the Labor Day holiday break, surged 175 percent year-onyear, China’s largest online travel agency Trip.com Group said.

“China’s domestic air travel market has recovered fast, and purchase of flight tickets will also increase gradually. As the global aviation market continues to suffer losses, a large number of aircraft are grounded and the delivery of new aircraft has been postponed. Buying new aircraft at this moment is good timing as the prices are relatively low,” said Lin Zhijie, an aviation industry analyst and a columnist at Carnoc, a major civil aviation website in China.

British power and propulsion company Rolls-Royce Plc, a manufacturer of aero engines for widebody aircraft, said stagnation in international travel has led to drastic reduction in engine flying hours. The strong recovery of China’s domestic air travel market has contributed significantly to its total revenue, Julian MacCormac, country director for China at RollsRoyce, said on Thursday in Beijing.

This year, the civil aviation sector in China will be in a recovery and growth period, yet, the pandemic is still the largest uncertain factor for the market, the Civil Aviation Administration of China said on Monday.

China will strive to restore the total annual air transport scale to more than 80 percent of the prepandemic level, and bring the volume of air passenger traffic to 90 percent of the pre-pandemic level, the CAAC said.

Boeing’s single-aisle B737 MAX aircraft remain grounded in China following two fatal crashes in Indonesia in 2018 and in Ethiopia in 2019.