A start-up airline based in Kunming has teamed up with two Chinese lessors to order 60 737-MAX planes worth US$6 billion from Boeing. Ruili Airlines, wholly owned by Yunnan Jingcheng Group, said it planned to purchase 30 of Boeing's newest narrowbody planes with Avic Leasing and another 30 with Minsheng Financial Leasing. Talks are on with the lessor partners on how many aircraft the airline would take on financial or operating leases, the airline's general manager, Ma Zhanwei, told the South China Morning Post . The 60 planes were to be delivered between 2021 and 2025, he said, adding Ruili plans to increase its fleet from the current five to 26 by 2020. "Depending on how many aircraft we will need then, we might lease some out to other airlines. We are sharing the delivery slots and we are sharing the revenue [of potential leases]," he said. Boeing's rival model to Airbus's A320neo is expected to be delivered to its first customer, American budget carrier Southwest Airlines, in 2017. Ruili, which entered its second year of operation yesterday, currently flies to 15 western Chinese cities from Kunming with five Boeing 737 planes. Two are configured with two classes and the rest are economy only. It had in 2012 ordered 14 Boeing 737 planes, including six 737 MAX, 12 of which are yet to be delivered. Ma said the airline would keep to a fleet of Boeing 737 family planes and planned to focus on a single-class configuration but was not operating as a no-frills carrier. While it is common for airlines and lessors to team up in placing orders for planes, they do not usually lease planes out to other airlines and share the revenue, said Will Horton, an analyst at the Centre for Aviation. "Sixty aircraft is a huge commitment for a start-up airline, especially one not owned by another airline or government," he said. "Lessors ease an airline's cash needs in the short or medium term, and in this transaction, two smaller lessors will build up their presence." Horton said Ruili's local competitor, Kunming-based Lucky Air owned by Hainan Airlines, was expected to transition to a low-cost carrier, potentially giving Lucky a strategic advantage. "I would think that for the foreseeable future, Ruili's lessor partners will have a greater presence than the airline," he said, noting that Ruili would also need to lobby for traffic rights from Kunming if it later turns to the international market, as currently only China Eastern and Lucky fly to international destinations from there. Last May Guangzhou-based low-cost start-up, 9 Air, a subsidiary of Juneyao Airlines, placed an order with Boeing for 50 jets for US$3.8 billion. A Boeing spokesman said the formation of new airlines in China was a reason behind more than 400 orders and commitments it received from the country last year for its 737-family planes, from 250 in 2013. Ruili was the first private carrier approved by the Civil Aviation Administration of China after the regulator relaxed restrictions on new carriers in 2013. Its parent group, Jingcheng, is a privately owned conglomerate founded in 1990 with businesses in hospitality, construction and metallurgy.
