The American aerospace giant, Boeing (BA, Financial), has booked net orders for 129 jets through May 12. Orders for its single aisle plane, the 737, make for the lion’s share of the total orders. The narrow body jet has booked orders for 66 units, which is more than half the total orders. And now, the proportion is going to increase with the latest order from a Chinese consortium of Ruili Airlines along with two plane leasing firms. China is a big market from where both Airbus (EADSY, Financial) and Boeing are receiving big orders to serve increasing demand for air travel. Here’s a brief look at the deal and the potential of this Asian market.
About the deal
Boeing bagged a commitment for 60 737 Max aircraft from the association. According to the official Xinhua News Agency, Ruili Airlines signed a contract with Minsheng Financial Leasing and AVIC Leasing to purchase Boeing’s top selling plane in a deal worth 38 billion yuan, which translates to $6.1 billion. Ruili is based out of the southwestern province of Yunnan. The carrier’s operating license got approved from the Civil Aviation Administration of China in February of last year.
The purchase is part of the carriers’ fleet expansion plan amid a surge in passenger traffic. Ruili currently runs five 737 aircraft and targets to increase its fleet to 56 jets in the next decade. Three of the five are leased from AVIC Leasing and Minsheng Commercial Aviation, and the remaining are company owned. By end this year, Ruili said that its fleet would grow to seven jets.
Boeing’s website displaying the price list of its aircraft shows the 737 Max to be priced between $87.7 million and $113.3 million. Boeing’s spokesperson at Beijing said that the plane maker is excited to chalk out the specifics of the order with the trio. Ruili was not available to remark on the deal. However, a spokesperson from the company told Flightglobal that the deal was finalized on May 18, which happens to be the carrier’s first anniversary. The airline operator would be leasing the jets from its deal partners. It would get half the planes from Minsheng, and the other half from AVIC Leasing. Ruili has also kept the option of placing orders for another 12 of these narrow bodies.
No information regarding the scheduled deliveries of the 60 737 Max is available. Also, whether the Chinese government has given the deal a go ahead signal is not known.
China: A big market for plane makers
China is one of the fastest growing aviation markets. Airbus and Boeing are receiving big orders from Chinese carriers, thanks to the soaring passenger traffic and rising number of low cost airlines in the region. According to an estimate made by CAPA Centre for Aviation last November, around 19 airline operators either began operations or declared plans to commence. Chinese regulations have loosened, which is encouraging new airlines in the market.
The latest order from Ruili is also a testimony of the same. In its market outlook 2014-2033, Boeing estimates that Asia Pacific would take more than a third of the global deliveries over the next two decades and China would be the key driver. This presents immense opportunity for the jet maker.
Goldman Sachs expects the order flow to slow down. However, Boeing expects to see a book to bill ratio of more than 1 in the current year, which means the plane maker projects to receive more orders than it delivers.Ă‚
