Beijing is to sign a long-awaited agreement to buy 36 aircraft from Boeing later this month, according to industry and government officials. The government would send a delegation to the US to sign the US$2 billion deal, Reuters in Beijing reported, quoting an unnamed State Development Planning Commission official. The agreement is understood to require approval from the commission, as well as the State Council, China's cabinet. The development comes ahead of a planned visit by President George W. Bush to Shanghai early next month for a meeting of Asia-Pacific Economic Co-operation leaders. He is expected to travel to Beijing after that meeting for a state visit hosted by President Jiang Zemin. Progress on the deal had been affected by soured Sino-US relations following a collision between a US spy plane and a Chinese fighter jet in Chinese territory in April. Meanwhile, China Southern Airlines officials said the company was close to signing an US$800 million 10-year finance lease agreement to acquire 20 Boeing 737-800 aircraft from next year to 2005 to replace its older 737 fleet. It will also lease two Boeing 747-400 freight aircraft next year. China Southern vice-chairman Wang Changshun said chairman Yan Zhiqing would soon visit the US to sign the agreement. The firm is expected to reap savings over the long term as ownership of the aircraft will pass to the airline at the end of the lease term. At present, most of its aircraft are effectively rented under operating leases of between three and five years, representing a regular cost on the airline's profit and loss accounts. These have to be returned when the lease expires. Through a finance lease arrangement, the aircraft will also be recognised as assets, bolstering the balance sheet. Under existing operating leases, they cannot be booked as assets. Mr Wang said the company would take delivery of five 737-800s from Boeing each year starting from next year, and was arranging yuan-denominated loans with mainland banks to finance them. The company may also consider financing them by issuing A shares, which are open only to mainland investors, when it becomes qualified to do so. It is one year short of the China Securities Regulatory Commission's requirement that listing candidates have a track record of at least three consecutive years of profits. Mr Yan also confirmed the company had been in discussions with Brazil-based aircraft builder Embraer for the purchase of 20 ERJ-145 50-seat aircraft. An industry source estimated the total cost of the potential deal would be more than US$300 million. Mr Yan said one consideration for China Southern on the purchase was whether the government would subsidise it as the aircraft would be used primarily for new regional short-haul routes in western China. These contain higher business risk than existing routes. Analysts said procurement of small and mid-sized aircraft, of 30 to 50-seaters, was a developing trend as long-haul traffic became increasingly saturated, while demand for regional short-haul traffic was rising. As well, Mr Yan said the company had not held talks with any of Taiwan's airlines on potential acquisition of a strategic stake in China Southern, but added future talks were possible.