This is not turning out to be a good week for Boeing Co. (NYSE: BA). On Tuesday a U.S. Department of Defense contract worth around $80 billion went to Northrop Grumman, and on Thursday morning, rival Airbus signed a general terms agreement worth $17 billion at list prices with a state-owned Chinese company for 130 passenger jets.
Source: Thinkstock
The agreement between China Aviation Supplies Holding Co. (CAS) calls for 30 A330 wide-body jets and 100 A320s, the Airbus competitor to the Boeing 737 family. Airbus and CAS signed a commitment letter in June for the 30 A330s. Thursday’s signing represents a firm order for the wide-body planes.
On September 23, the official Chinese news agency Xinhua reported that the country’s Commercial Aircraft Corporation of China Ltd, known as Comac, signed a “cooperative document with Boeing to build a 737 completion center in China.” Boeing confirmed the agreement the next day, and also announced an order for 300 jets from CAS. The deal involved orders and commitments for 240 aircraft — 190 of Boeing’s 737s and 50 wide-bodies — and 60 737s for two of the country’s leasing firms. The total value of the deal at list prices is $38 billion.
Airbus has committed to building a completion center in China for the A330 family of planes, similar to the one that has been in operation since 2009 for the A320 family. Airbus president and CEO Fabrice Bregier said:
With these 30 A330 options now firmed up, CAS’ total number of orders for the popular Airbus widebody is this year 75 aircraft. This strong demand in China for the A330 has been the key driver behind our decision to set up an A330 Completion and Delivery Centre in Tianjin, China next to the A320 Family final assembly line and delivery centre in Tianjin, which has assembled and delivered more than 240 Airbus single aisle aircraft. This will enable us to be even closer to our customers and to take our long-standing mutual beneficial partnership with China to a new height.
There are at least two takeaways from Thursday’s announcement. First, Airbus is being rewarded for agreeing to build another completion center in China, and Boeing is being reminded to get a move on with building the 737 line it has promised. Second, those 300 planes that CAS ordered from Boeing are not all firm orders, and CAS can take them away as easily as it awarded them.
Like we said, this has not been Boeing’s week.
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