Carriers spend US$5.7b on new aircraft to bulk up fleets as demand recovers

Mainland carriers have made another round of fleet purchases after passenger demand rebounded across the nation last year.

Air China, the Beijing-based carrier, ordered 20 Airbus A320s at a total catalogue price of US$1.63 billion yesterday, the third order made by the three biggest mainland carriers since late last year.

The big three, which also comprise China Southern Airlines and China Eastern Airlines, have ordered a total of 16 A330s and 40 A320s over the past three months, worth a combined US$5.7 billion, based on documents filed with the Hong Kong Stock Exchange.

Mainland carriers had said they wanted to delay delivery of new planes after business declined in the first half of last year. In the end, however, none of them delayed delivery, a mainland banker said.

State-backed carriers are sought after as borrowers on the mainland, and easily get funding to purchase new aircraft at a low cost, said Qi Bin, an official with the international finance department at China Construction Bank.

'The case of Japan Airlines [which sought bankruptcy protection last month] would not happen in China, so the banks are very keen to lend money to the big three carriers,' Qi said. He did not disclose the exact pricing of the loans. However, because of tightened credit on the mainland this year, Qi expected the cost of borrowing for new aircraft acquisitions to rise.