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News > Companies
Boeing inks China deal
October 2, 2001: 1:57 p.m. ET

Aircraft maker selling 30 commercial 737s to four carriers for $1.6 billion
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NEW YORK (CNNfn) - Boeing Co. signed an agreement Tuesday to sell China 30 commercial 737 aircraft in a $1.6 billion deal.

China plans to use the new aircraft, scheduled for delivery between 2002 and 2005, to replace the aging fleet among its four national carriers, a Boeing spokesman said. The carriers are China Southern, which will get 20 aircraft, China Eastern, which gets 4 planes, and Hainan Airlines and Shanghai Airlines, each of which will receive three.

The signing ceremony took place at 1 p.m. ET at the Commerce Department in Washington. Commerce Secretary Donald Evans attended along with members of Congress, China's Vice Chairman for State Development Planning Commission Zhang Guobao, and Alan Mulally, CEO of Boeing's Commercial Airplane Group.

Boeing delivered its first 737 to China in 1983. Currently there are 197 operating in the country, making it the most popular commercial jet in the China fleet.

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"China has a huge population that is still developing its air travel infrastructure," the spokesman said.

Boeing made its first sale to China in 1972 after President Nixon's historic visit. Chinese airlines now operate about 500 jetliners, most made by Boeing.

Boeing estimates that during the next two decades China will need nearly 1,800 commercial jets worth $137 billion. China's air traffic growth is expected to average 9.3 percent annually during the same time period.

The company, which beat out Europe's Airbus Industrie for the contract, said its last deal with China came in March 2000 in a contract for three 757 aircraft worth $180 million-to-$200 million.

"Today's announcement reflects an expansion in bilateral trade between China and the United States and it underscores the strength of Sino-U.S. relations," said Zhang in a statement.

Boeing (BA: up $1.26 to $33.66, Research, Estimates), which expects to remain profitable despite the Sept. 11 terrorist attack in which hijackers rammed commercial jets into the World Trade Center and the Pentagon, said the deal is not the largest in its 30-year relationship with China. But the aerospace manufacturer said the deal is significant because China is projected to become the world's second-largest commercial aircraft consumer behind the United States during the next 20 years.

At least one analyst said the negative effects of the terrorist attacks on the aerospace and travel industry, are likely to offset the profit Boeing will make from the deal.

However, over the long term, orders from China could help bolster a troubled industry.

"There have been expectations of a significant order for China for some time, so I don't think this actual announcement is terribly breaking news," said John Rogers, an analyst with D.A. Davidson. "But what it does underscore is that despite the obvious problems the industry is having in the U.S. and Western Europe, there is basic demand for aircraft. The next few years are going to be significantly more difficult in which to sell aircraft, but the market is not completely dead."

Last month, Boeing announced a plan to cut up to 30,000 jobs in response to the slowdown in the air transport industry following the terrorist attacks, which prompted many commercial air carriers to defer new aircraft purchases.

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Boeing's Seattle-based commercial jet unit has announced deliveries will fall below forecasts for 2001 and 2002 and could continue to slide into 2003. In 2002, Boeing projects just more than 400 deliveries, down from a previous forecast of 510-to-520, with the downward trend likely to continue in 2003. Boeing has said it expects to deliver as few as 500 new jetliners in 2001. graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.