China in talks with Airbus on US$20b aircraft deal

Purchase expected to help restore trade ties between Beijing and Europe after row last year

PUBLISHED : Thursday, 20 March, 2014, 1:35am
UPDATED : Thursday, 20 March, 2014, 5:27am

China is in talks to buy at least 150 Airbus passenger jets potentially worth US$20 billion when Xi Jinping pays his first visit to Europe as president this month, people familiar with the matter said.

In a broad-ranging deal that could help reset trade relations between China and Europe after a bumpy year, China is expected to buy more A330 passenger jets as talks advance to open Airbus' second major factory in the country.

The "cabin completion" plant for A330s would bolster Airbus' presence five years after the opening of its first final assembly plant outside Europe in Tianjin, where Chinese workers put together A320 jets.

The deal could also involve a decision to unfreeze the purchase of 27 A330s blocked by China during a recent row with the European Union over environmental policies.

"This visit to Europe by Xi … will certainly beneficially promote the development of ties between China and the European Union," foreign ministry spokesman Hong Lei said when asked to confirm the aircraft order. "This will be an all-round development of relations."

A spokesman for Airbus declined to comment. Spokesmen for Air China, China Eastern and China Southern all declined to comment.

Both France and Germany are anxious to establish good ties with Xi and announcements on the Airbus deal package could be made in both countries, European officials said.

The package could also include A320 and A350 aircraft, sources said.

They said the final size of the deal could change and would depend on last-minute talks. Previous state visits have included tough negotiations on the sidelines.

China remains the world's fastest-growing aviation market despite a recent slowdown in its economy, with a surge in outbound travellers fuelling the expansion. One in four people from China travelled by plane last year, with that number set to rise, Airbus says.

Airbus faces stiff competition from US rival Boeing over such deals, especially for wide-body jets like the A330, an established model that Airbus is hoping to revitalise as Boeing increases output of its newer 787 Dreamliner.

Both companies are offering their aircraft at steep discounts to win China's business, industry sources say.