Tue, Mar 26, 2002 - Page 1 News List

China Airlines to order at least 12 jets

BLOOMBERG , TAIPEI

China Airlines Co (CAL, 華航), Taiwan's largest carrier, yesterday said it plans to order at least 12 passenger planes from Airbus SAS or Boeing Co, a US$1.5 billion fleet expansion that comes as global air travel rebounds from recession.

CAL is considering buying Airbus A330-300 or Boeing 777 passenger planes, and may take options for more than the 12 it plans to order, company spokesman Paul Wang (王振畬) said. The carrier is still evaluating which 777 model to buy.

Based on list prices, 12 A330-300s are worth as much as US$1.54 billion, although Wang suggested CAL may pay less.

"Boeing and Airbus are engaged in an intense competition, so China Airlines is in a good negotiation position," Wang said.

The airline is making final evaluations of offers and will announce its decision within two months, he said.

Airlines worldwide suffered a drop in demand because of slowing economies and the Sept. 11 terrorist attacks in the US, cutting aircraft orders and pressing Airbus and Boeing to lower prices.

CAL, which reported 2001 profit fell by two-thirds, expects a rebound this year. The government forecasts the economy will return to growth this quarter after its worst recession on record last year, as demand for electronics exports recovers.

"Airline profits are closely correlated with the economy, so investors can expect China Airlines to ride on the economic recovery," said John Lin, who helps manage NT$17.8 billion (US$3.4 billion) at Prudential Securities Investment Trust Co (保誠投信) and doesn't own CAL shares.

Shares of CAL rose NT$0.60 cents, or 3.9 percent, to NT$16, their biggest gain in three weeks.

CAL bought seven Airbus A340-300s in August 1999, after ordering 13 Boeing 747-400 cargo jets and five Boeing 737-800 passenger jets earlier that year.

A local Chinese-language newspaper reported earlier that CAL will place orders and options for as many as 16 Airbus A330-300 passenger jets worth as much as US$2 billion.

The carrier denied it has decided in favor of Airbus.

"We won't know the final decision until both planemakers have submitted their best offer," Wang said.

The A330-300 has the same cockpit design and shares parts with the Airbus A340 planes CAL now operates, which makes the aircraft financially attractive because operating, maintenance and training costs are reduced, Wang said.

The airline will retire its 12 A300-600Rs and one MD-11 after taking delivery of the 12 new jets, he said.

Boeing spokesman Mark Hooper and Airbus spokesman Tony Phillips both declined to comment.

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