China Eastern Seals $5.4 Bln Airbus A320 Deal

November 23, 2012

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China Eastern Airlines, one of the country's top three carriers, has agreed to buy 60 Airbus A320 aircraft for about $5.4 billion, expected to be delivered in stages from 2014 to 2017.

This is the first major deal involving Airbus and a Chinese airline after the European Union agreed on November 12 to "stop the clock" for a year on plans to force non-EU airlines to adopt its Emissions Trading Scheme.

The new aircraft will help the airline satisfy rising demand for domestic medium- and short-haul passenger routes, China Eastern said on Friday. The deal is subject to approval by the airline's shareholders and mainland regulators.

In a filing to the Hong Kong Exchange after markets closed, China Eastern said it planned to fund the purchase from its working capital, commercial bank loans and other sources it didn't specify.

While this may increase its debt-to-equity ratio, the airline said it did not expect the deal to have a substantial impact on its cash flow position or its business operation.

China Eastern said it had also entered a disposal agreement with Airbus for eight of its Canadair Regional Jets and 10 Embraer Regional Jets that have a combined book value of CNY1.5 billion yuan.

These 18 aircraft are expected to be delivered to Airbus in stages from 2014 to 2016. China Eastern said it received these aircrafts between 2000 and 2007, which now have an average usage of about 8.2 years.