Boeing received (19-Jan-2011) final approval from the Chinese Government confirming a USD19 billion aircraft agreement. China's approval of airline contracts cover 200 orders for B737 and B777 aircraft, to be delivered over three years between 2011 and 2013. The approval helps Boeing maintain and expand its market share in the world's fastest-growing commercial aircraft market. Over the next 20 years, Boeing projects that China will need 4330 new aircraft worth more than USD480 billion, with China expected to be Boeing's largest commercial customer. The order is part of USD45 billion worth of deals signed between China and the US (MarketWatch/Bloomberg/Reuters, 19-Jan-2011). Other deals included a variety of General Electric contracts, a USD7.5 billion Alcoa investment agreement and a USD1.4 billion Caterpillar agreement to ship equipment and engines to China. The White House stated the exports will support 235,000 US jobs. The agreements were announced in conjunction with Chinese President Hu Jintao’s state visit to the US. [more - Boeing]
China approves USD19bn aircraft agreement with Boeing
You may also be interested in the following articles...
Frontier and Spirit Airlines ramp up their fleets to support bullish views on passenger stimulation
ULCCs Frontier and Spirit hold orders for more than 150 Airbus narrowbodies to support the proliferation of the model across the US. Frontier’s fleet is projected to grow by 83% from YE2016 to 2021 – from 66 to 121 aircraft. Spirit’s current fleet forecast shows 46% growth from YE2017 to 2021 – from 108 aircraft to 158 aircraft.
Each airline is taking nuanced approaches to financial management of its fleet. Spirit has opted to purchase some aircraft off lease in order to enlarge its number of owned aircraft, while Frontier, which is just embarking on the process of accessing public markets, will use operating leases as its primary financing vehicle.
The planned growth by each airline reflects conclusions reached by Frontier and Spirit about the opportunities for the ULCC model in the US, despite changing market dynamics – namely a push by large US global network airlines to create pricing segments to compete more effectively with ULCCs. Despite the focus on price matching by larger airlines, Frontier and Spirit remain bullish on the opportunities for stimulation in the US market.
The US Big 3 airlines work to slash pensions while maintaining responsible balance sheet management
The three large US global network airlines – American, Delta and United – continue to tout the strength of their balance sheets; the results which they’ve achieved during the past few years by the use of various tools, including free cash flow generation and debt reduction.
Delta is using its newly minted investment grade status to tap markets for creative ways to fund its hefty pension obligations during the next two to three years. American is also working to ensure pension compensation coverage by lifting its liquidity targets as rules allowing favourable minimum funding contributions expire in 2017.
Each of those airlines is bracing for fairly substantial capital expenditures during 2017, largely driven by aircraft acquisitions, but American, Delta and United have no plans to compromise their balance sheet progress irrationally in order to support fleet revamps.