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China dominates aircraft orders at Paris Air Show
Chinese aircraft lessors, including CDB Aviation, Avolon (a subsidiary of Hainan-based HNA Group), China Aircraft Leasing Group, and BOC Aviation, made agreements for a combined total of 240 aircraft at the Paris Air Show, which is higher than the activity among US aircraft leasing companies.
Michael Marray 28 Jun 2017

Chinese operating lessors were at the forefront of new orders announced by Boeing and Airbus at the Paris Air Show, which took place between June 19 and 25 at Le Bourget, a commune in northeastern suburbs of Paris.

Aircraft lessors including CDB Aviation, Avolon (a subsidiary of Hainan-based HNA Group), Hong Kong-listed China Aircraft Leasing Group (CALC), and BOC Aviation, made agreements for a combined total of 240 aircraft.

The second highest amount of activity came from the US, with combined US deals totalling more than 150 aircraft among GECAS, Air Lease Corp, and Aviation Capital Group. The bulk of orders came from GECAS with agreements for 100 A320neo aircraft worth about US$10.8 billion at list price, and twenty 737 MAX 10 jets, worth about US$2.5 billion at list price.

During the show, China Development Bank subsidiary CDB Aviation signed agreements over 100 aircraft. CDB Aviation signed a memorandum of understanding (MoU) with Airbus for forty-five aircraft, consisting of thirty A320neo models (new engine option) and fifteen A321neos. Engine choice will be made at a later date. In addition, fifteen A320neo positions from CDB Aviation’s previous order will be converted to A321neo aircraft.

The A320neo family not only incorporates the new generation engines, but also wing sharklets (a new type of wingtip), which together deliver at least 15% fuel savings compared to the previous A320 model. The A320neo family has already won more than 5,000 orders from over 90 customers since its launch in 2010.

In addition to its Airbus deal, CDB Aviation also announced orders for the Boeing 737MAX, which is the direct competitor to the Airbus A320neo family. The new 737MAX 10 version was officially launched at the Paris Air Show.

CDB Aviation signed an MoU for forty-two Boeing 737 MAX 8s and ten 737 MAX 10s, as well as eight 787-9 Dreamliner widebodies. Included in this agreement is the conversion of six previous 737 MAX 8 orders to the new 737 MAX 10s.

With this commitment, valued at US$7.4 billion at list prices (although discounts for large customers typically run somewhere between 40% and 50%), CDB Aviation will become one of the launch customers for the 737 MAX 10.

“Our new vision is to propel CDB Aviation into a formidable global aviation leasing platform,” says Peter Chang, president and chief executive officer, CDB Aviation. “The 737 MAX, the fastest-selling airplane in Boeing history, and the 787 Dreamliner, will play a key role in bolstering our fleet and advancing our global market presence to fulfill the vision.” CDB Leasing currently has a committed fleet of over 300 aircraft.

Also at the centre of the action at this year's Paris Air Show was Avolon, the Dublin-based lessor that was acquired by HNA Group in late 2015. Avolon has since grown with the US$10 billion acquisition of the CIT Group leasing unit, a transaction that closed in April.

Avolon announced the signing of an MoU for seventy-five 737 MAX 8s. The commitment, valued at US$8.4 billion at list prices, will bolster Avolon's single-aisle portfolio to meet growing customer demand in that market segment. The MoU also includes purchase rights for an additional fifty 737 MAX 8s.

“This order represents the single largest order that Avolon has placed with Boeing to date and underlines the scale of our ambition and the strength of our business,” comments Avolon CEO Domhnal Slattery. “Our strategy is to maintain an industry-leading portfolio of young, modern and fuel efficient aircraft. We were pleased to deliver the world's first ever 737 MAX 8 this year, and the addition of a further seventy-five Boeing 737 MAX aircraft reflects our commitment to our customers to have a product offering built around the most technically advanced and efficient aircraft available in the market.”

With an aircraft portfolio that numbers more than 850 airplanes in service and on order, Avolon manages one of the largest, as well as the youngest, fleets in the world.

Meanwhile, CALC also announced an order for fifty 737 MAX airplanes. The agreement includes an order for fifteen 737 MAX 10s. This order is CALC's first direct purchase from Boeing, with a value of US$5.8 billion at list prices.

“This large order of one of the newest and most popular aircraft will support the acceleration of CALC's business expansion,” says Mike Poon, CEO of CALC. “Our strong order book is a valuable asset that is supporting our global expansion strategy, and we will continue to strengthen our future delivery pipeline in collaboration with aircraft manufacturers, among other aviation partners.”

CALC currently owns a fleet of 89 aircraft. With this new order, its outstanding order book now consists of 139 aircraft, putting the company on track to deliver a total of no less than 230 aircraft by 2023.

CALC has explored a variety of financing channels to ensure flexibility for its global expansion. In addition to its long-standing relationship with Chinese and international banks, CALC has been an active player in the bond market, having issued three batches of senior unsecured bonds in the aggregate amount of US$1.1 billion over the past 18 months.

Also doing business in Paris was Bank of China subsidiary BOC Aviation (which listed on the Hong Kong Stock Exchange in May 2016), with an MoU for ten 737 MAX 10s.

Also attracting interest at the show was the display area for the Chinese made Comac C919 narrow-body jet, which made its maiden test flight last month. And with the Russian MC-21 (made by United Aircraft Corporation) also being marketed at Le Bourget, airline and lessor customers are seeing the first signs of competition from China and Russia in the single aisle market – which is at present dominated by Boeing and Airbus.

Airline orders
In addition to aircraft ordered by the operating lessors, there were also orders placed directly by Chinese airlines.

Xiamen Airlines announced the signing of an MoU for ten 737 MAX 10 airplanes, valued at US$1.2 billion at list prices. Xiamen Airlines will become one of the launch customers for the 737 MAX 10.

The airline will now work closely with Boeing and relevant stakeholders to finalize the agreement, which requires the approval of Xiamen Airlines' board of directors, the China Southern Airlines Company Limited's board of directors, as well as the Chinese Government, which holds a majority stake. Xiamen Airlines is a subsidiary of China Southern Airlines.

Xiamen Airlines is an existing 737 MAX customer and plans to use the new airplanes with their subsidiaries, including Hebei Airlines and Jiangxi Airlines.

Xiamen Airlines currently operates an all-Boeing fleet of more than 160 airplanes including nine 787 Dreamliners, 149 Next-Generation 737s, and four 757 airplanes. The carrier plans to grow its operational fleet to 280 airplanes by the end of the decade and looks to expand regionally with the new 737 MAX family.

Donghai Airlines also announced the airline's decision to convert ten 737 MAXs on order to 737 MAX 10s at the Air Show. The order is valued at US$1.2 billion at current list prices.

Shenzhen-based carrier Donghai Airlines started freighter operations in 2006 and expanded to offer passenger services in 2014. Donghai Airlines currently has a fleet of fifteen Boeing 737-800s serving more than 35 cities across China. With an extended air-route network, the Shenzhen-based carrier plans to start international long-haul flights between 2021 and 2023 and grow its fleet to 100 airplanes by 2025.

Photo: siae.fr

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