By XUE Bingbing
China Aviation Supplies Holding Company (CASC) agreed to purchase 160 Airbus civil aircraft for about US$20 billion (140 billion yuan) on April 6. The European aircraft manufacturer will deliver 150 of its A320 series and 10 A350-900 wide-body aircraft.
The sale was agreed during the state visit to China of French President Emmanuel Macron. At the same time, Guillaume Faury, CEO of Airbus, signed agreements to build a new assembly line at Airbus's Tianjin plant.
The deal for the sale of the aircraft is a move to boost the use of sustainable aviation fuels (SAFs). With global passenger numbers rebounding, emerging markets are looking to increase investment in SAFs. Reuters reported that Airbus was negotiating new orders with China amid worsening relations between Washington and Beijing.
Airbus expects China to need 8,500 passenger and cargo planes by 2041, about 20 percent of the anticipated global demand of around 40,000.
Airbus entered the Chinese market in 1985 when an A310 was delivered to China Eastern Airlines. By the end of the first quarter of 2023, the Airbus' in-service fleet in China has risen to over 2,100 aircraft, representing more than 50 percent of the market. In July last year, Airbus received orders for nearly 300 A320NEO narrow-body jets from three state-owned airlines, totaling more than 240 billion yuan.
The buyer, CASC is one of six holding companies of the China Civil Aviation Administration. The company offers leases, aircraft trading, sale-leaseback, asset management and equipment engineering services. Since its establishment in 2002, CASC has entered into 14 agreements with Airbus and Boeing.
The pandemic caused domestic airlines to slow down the addition of aircraft. In 2018-2019, Air China put about 50 new into the skies aircraft. In 2020, the number was only 14. Those “new” aircraft are no four or five years old, maintenance costs are rising significantly and fuel economy lags far behind new aircraft.
More than 2,000 international passenger flights departed in the last week of March, about 80 percent of pre-pandemic levels. As the international aviation market continues to recover, airlines also need more wide-body aircraft, which they need soon.
Currently, Airbus has four A320 assembly sites in France, Germany, the US and Tianjin. The Tianjin line started running in 2008 and has put together over 600 aircraft to date. Last month, the first A321neo rolled off the line.
In the second half of 2022, Airbus captured about 54 percent of the Chinese market. With the new production line in its Tianjin plant by the end of 2025, Airbus will assemble 20 percent of its single-aisle jets in China.
Airbus forecasts that China’s air traffic will grow at an annual rate of around 5 percent for the next 20 years, significantly faster than the world average of 3.6 percent.
Faury is confident of maintaining market share in China after the pandemic, "but now, Airbus also faces a problem - how to conquer the Chinese freighter market."
Airbus has a significantly lower share of the Chinese freighter market than its rival Boeing, but worsening trade relations with the US have essentially locked Boeing out of the market. Last year, US aerospace exports to China were worth US$5.5 billion, less than a third of the record US$18 billion shipped in 2018.
China Southern has the highest number of all-cargo aircraft, but all are Boeing B777. SF Airlines, the "express" airline, is the largest cargo airline in China's fleet, with more than 80 aircraft, again, almost all are by Boeing.
Chinese airlines currently have about 200 all-cargo aircraft. That’s only about 10 percent of the global total. By 2041, with the growth of the market, China’s domestic cargo aircraft fleet will reach 690, accounting for more than 20 percent of the global market. That’s huge growth potential.
