Airbus in talks to sell more than 100 widebody jets to China

Airbus SE is negotiating a major sale of A330neo aircraft to China, with talks gaining momentum since President Xi Jinping visited his French counterpart Emmanuel Macron last month.

The largest Chinese airlines are considering buying more than 100 of the upgraded A330 models, according to people familiar with the matter. The terms are still being discussed and the timing is uncertain, said the people, who asked not to be identified because the matter is confidential.

The negotiations underscore the increasingly stark contrast between Airbus and Boeing Co. when it comes to doing business in China’s crucial aviation market as geopolitical tensions between the Asian nation and the US run high. An order of that magnitude would be significant considering it’s for a single type of jet across a range of carriers, and it’s been around two years since Airbus’s last China transaction.

China has once again halted imports from US-based Boeing, just months after it had restarted following a five-year drought, as regulators review a cockpit voice recorder design already approved by their counterparts in the US and Europe. Meanwhile France-based Airbus benefits from its local investment in Asia’s largest economy, including a factory that builds the workhorse A320neo model and another that installs interiors in the A330, and was one of the key beneficiaries of Xi’s recent outreach to European leaders.

A spokesman for Airbus declined to comment. Air China Ltd., China Southern Airlines Co. and China Eastern Airlines Corp. didn’t immediately respond to requests for comment. State-owned procurement agency, China Aviation Supplies Holding Co., didn’t immediately respond to a fax seeking comment. 

Airbus shares climbed as much as 0.3% in early trade in Europe.  The stock is up 12% this year, versus Boeing’s 29% drop. 

Any order from China would shore up the backlog for the slower selling A330neo, which is an updated version of the older A330 with new engines and wings. Airbus also makes the more advanced and longer-range A350 model that has seen a flurry of orders in the last couple of years and is sold out until almost the end of the decade. 

Currently, Airbus has 165 unfilled orders for the A330neo, which made its commercial debut in 2018. The model has struggled to win new purchase agreements in a market full of discounted, readily available used versions, according to George Ferguson, an analyst at Bloomberg Intelligence. That means the European planemaker may be more open to offering better pricing and other terms to bolster its order book at a time it’s planning to ramp up A330 production, he said.

EU Investigation

But it also comes at a time of heightened economic tensions and could get caught up in the back and forth around the European Union’s investigation into Chinese subsidies for electric vehicles, which China is unhappy about.

Aviation is among the sectors Beijing has privately warned the EU could be targeted should the bloc move ahead with plans to impose tariffs on EVs made in China, according to another person familiar with the matter. China has made those and other threats in a letter to EU trade chief Valdis Dombrovskis, said the person, who spoke on condition of anonymity.

The EU sees the process as a technical and legal one, and currently remains on course to introduce provisional tariffs next month. China has been working to increase the pressure on the EU and member states to negotiate, and last week announced restrictions on the export of equipment used to make things such as airplane engines and turbines.

Should a transaction eventuate, it would provide quicker access for Chinese airlines to new jets with better fuel efficiency as orders and supplier constraints stack up for Airbus’s A350 and Boeing’s rival 787 Dreamliner. Airbus and Boeing only have a handful of widebody jets to deliver to China’s carriers, adding to the sense of urgency to finalize deals as planemakers see production slots for both single-aisle and twin-aisle jets fill up.

While the country is working on ramping up its homegrown aviation industry with the C919 model made by Comac, it doesn’t currently have a presence in the twin-aisle category.

Boeing has previously supplied hundreds of its 777 and 787 Dreamliners to Chinese carriers. The planemaker still has outstanding orders for over a dozen widebody jets from Chinese airlines, according to its website.

Widebody jets have seen a surge in demand as long-haul travel rebounds from the lows of the pandemic. Airlines across the world have been ordering new twin-aisle jets to replace older planes as well as expand their offerings.