Rock Solid Fortune

Some holiday background reading -- Looks good for the profits of the South China Bluesky Aviation Oil joint venture.
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Published December 31, 2004 in Business Times of Singapore

China to halt plane purchases in 2005

(SHANGHAI) China, the world's fastest-growing aviation market, won't allow new aircraft purchases next year because it will have enough planes to meet travel demand, its aviation regulator said.

Increasing plane purchases may hurt air safety and service, Civil Aviation Administration of China Director Yang Yuanyuan said in a speech published in the CAAC Journal.

Airbus SAS and Boeing Co, the world's largest commercial planemakers, are vying for orders in China, where passenger traffic growth is forecast to exceed the global average in the next two decades. Boeing expects Chinese airlines to buy 2,400 planes worth US$197 billion in that period, making China the world's second-largest airplane market out of the US.

'They are receiving aircraft more rapidly than they can absorb,' said Paul Nisbet, a JSA Research Inc analyst in Newport, Rhode Island. 'China did the same thing several years ago and it lasted for only about a year. What happened then was they ended up with excess demand.'

Both Boeing and Airbus declined immediate comment. Mr Nisbet said China's decision won't affect 2005 airplane deliveries, which are already under contract.

'Boeing and Airbus are 100 per cent ordered up for next year's production,' he said. 'It could affect 2006 orders, but we don't know how long the ban will stay in place.'

Boeing on Oct 27 said it expected deliveries to rise 12 per cent to 320 next year from a forecast 285 this year because of demand from airlines outside the US, especially in Asia.

'Asia is very strong because that's where the traffic growth is,' Boeing CEO Harry Stonecipher, 68, said in a July interview. 'The Chinese need lots of airplanes, and they'll buy lots of airplanes.'

Air travel for China's carriers is forecast to expand 7.5 per cent annually, compared with 4.5 per cent growth in North America, Boeing said on its website. Next year, 147 planes will be delivered to Chinese airlines, Chinanews said on its website yesterday.

Boeing has said rising demand from Chinese travellers will translate into sales of its new 7E7 model. The company is counting on the 7E7 to regain market share from Airbus.

Boeing in November said it had 'high hopes' that airlines in China would soon place orders for as many as 80 of its 7E7s. So far it has received 52 firm orders for its 7E7. It had set a goal for selling 200 of the planes this year.

China contributed US$749 million, or 1.5 per cent, of Boeing's US$50.5 billion in total sales in 2003. Through November of this year, Boeing had delivered 261 planes, of which 16, or 6.1 per cent, went to Chinese airlines. - Bloomberg
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Happy & Prosperous New Year to all, Graham