China Eastern Airlines

Cancellation of Airbus orders 'not political'

PUBLISHED : Monday, 02 March, 2009, 12:00am
UPDATED : Monday, 02 March, 2009, 12:00am

The cancellation of US$10 billion worth of Airbus aircraft orders by the mainland government was a result of the worsening economic climate, not political considerations, an official of the Civil Aviation Administration of China was quoted by state media as saying.

Aircraft orders were an economic matter and cancellations are 'not aimed at any country or company as speculated by foreign media', the official said in a Chengdu Business Daily report carried on Xinhua's website yesterday.

'The domestic aviation sector was severely hit by the financial crisis. As a result, the CAAC strengthened control on capacity and reduced orders to minimise losses.'

The remarks followed media reports that Beijing would delay the signing of a deal with Airbus.

The order for 150 aircraft was worth about US$10 billion, the report said.

Bloomberg reported last week that the French aircraft maker had planned to sign the fourth Chinese order this year, but it now did not expect any deal for the year.

It was speculated that the cancellation stemmed from the souring of diplomatic relations after French President Nicolas Sarkozy met the Dalai Lama, the exiled Tibetan Buddhist leader, in December.

Mainland airlines are falling victim to shrinking passenger demand and facing cost pressure amid the unfolding financial crisis.

The country's three largest airlines, China Southern Airlines, Air China and China Eastern Airlines Corp, all predicted they would post losses for last year.

Shanghai's China Eastern is struggling to keep afloat, seeking a government bailout and banking loans after its debt-asset ratio exceeded 97 per cent at the end of September.

The cancellation of this year's order also deals a heavy blow to Airbus, as it expects the mainland to become the second-largest market for passenger aircraft until 2026.

Deal grounded
The mainland's order for 150 aircraft was worth about, in US$: $10b