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China Airlines to Buy Planes From Both Boeing and Airbus

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From Reuters

China Airlines sealed an order for aircraft from Boeing Co. and detailed plans to buy more jets from Airbus Industrie in hotly contested deals that analysts said should please all three.

China Airlines said that if all options are exercised, it would buy a total of 36 airliners worth $5.6 billion from the two fierce aerospace rivals.

The combined purchase is the largest in Taiwan’s history and one of the largest in Asia since an economic crisis that began in 1997 put a crimp in regional aircraft demand.

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China Airlines and Boeing signed a deal in Taipei for the carrier to buy 13 747-400 cargo jets, with options for six more cargo and passenger jets. China Airlines put the value of the Boeing deal at $3.8 billion.

Boeing Asia President Fred Howard called it “the largest single order of 747-400s in Boeing history.”

China Airlines had confirmed earlier that it planned to buy seven A340-300 passenger planes from European consortium Airbus. It said it would take options on more Airbus planes, with details to come today at a signing ceremony in Taipei.

The deals have been wrapped in controversy since China Airlines first said during the weekend that it would buy Airbus passenger planes despite a 1995 agreement to buy Boeing 777s.

Reports have been rife in Taipei that Taiwan’s government, through a state-run foundation that owns a 71% stake in the airline, jilted Boeing to punish Washington for not supporting Taipei in a heated political dispute with Beijing.

That prompted a failed round of U.S. lobbying, which angered Airbus.

Both Taipei and the airline denied any political motivation.

But analysts said that after two lean years for aircraft orders in Asia, both Boeing and Airbus should be happy.

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Boeing can be pleased that the deal confirms its dominance of the Asian market for cargo aircraft, said Ian Smith, aviation analyst with S.G. Securities in Hong Kong.

“And Airbus can be happy it won the passenger bid, the only one it was reasonably expected to compete for,” he said.

The aggressive purchase also marks a positive step in China Airlines’ recovery from two crashes of Airbus 300-600Rs in five years, which killed a total of 466 people, analysts said.

“They’ve had their problems, but they are a strong airline and will be here for a while,” said Michael Kobal, an analyst with Primasia Securities in Taipei who follows the airline.

Besides the firm orders for the 747-400s and 737-800s, China Airlines has options for four 747-400 cargo jets and two 747-400 passenger planes.

Delivery of the 747-400s, both the firm orders and options, is set to start in July 2000. The 737-800s will be delivered beginning in October 2000.

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