China sells jets, dabbles in Eastern Air revival

ZHUHAI, China Tue Nov 13, 2012 3:32pm IST

1 of 4. The tail of a model of Comac C919 passenger plane built by the Commercial Aircraft Corporation of China (COMAC) is seen on the first day of the China International Aviation & Aerospace Exhibition in the southern Chinese city of Zhuhai November 13, 2012. China announced 50 new orders for its new Comac C919 passenger jet at the opening of the country's main air show on Tuesday and looked set to assist in the rebirth of one of the most famous names in aviation -- defunct U.S. carrier Eastern Air Lines.

Credit: Reuters/Bobby Yip

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ZHUHAI, China (Reuters) - China unveiled 50 new orders for its COMAC C919 passenger jet at the opening of the country's main air show and promised to assist in the rebirth of one of the most famous names in aviation -- defunct U.S. carrier Eastern Air Lines.

Potentially worth several billion dollars, the orders for China's first commercial passenger jet dominated the first day of the China Airshow, held every two years in the southern city of Zhuhai, along with fresh evidence of China's military ambitions.

The C919 is designed to challenge Airbus EAD.PA and Boeing (BA.N) in the largest segment of the $100 billion annual jetliner market.

Tuesday's orders for the 150-seat jet boosted the official tally to 380, reaching the state-owned manufacturer's declared breakeven point of 300-400 orders.

However, Western analysts say it will be some time before the aircraft, due to make its maiden flight in 2014, proves both its technical worth and its financial viability.

"You can always build a jet -- you can practically Google it, in fact," said Virginia-based aerospace analyst Richard Aboulafia. "But the real skill is creating something the market wants and then selling and financing it."

Confirming a Reuters report, Commercial Aircraft Corporation of China (COMAC) announced orders for 20 aircraft each from local carriers Joy Air and Hebei Aviation Group.

Its only foreign customer GECAS, the leasing and financing unit of General Electric (GE.N) which co-produces the engines, agreed to buy 10 more, taking its total order for the plane to 20.

Others that have expressed interest include Irish low-cost carrier Ryanair (RYA.I) and British Airways IVAG.L, according to COMAC.

Separately, COMAC forecast the global passenger fleet would double in size over the next 20 years, thanks mainly to a sharp increase in demand from China where annual passenger traffic would grow an average 7.2 percent each year to 2031.

In its 2012-2031 Market Forecast report, COMAC predicted 31,739 new planes, valued at $3.9 trillion, would be needed worldwide over the next two decades to meet demand. China alone would need nearly 5,000 new planes in that time.

EASTERN REBORN?

In a surprise move, the state manufacturer also announced tentative purchase plans by investors said to be planning to resurrect U.S.-based Eastern Air Lines, which went bankrupt in 1991.

There have been sporadic reports of efforts to relaunch the airline, whose forked logo was seen on display as a backdrop to Tuesday's signing ceremony.

The announcement puzzled several delegates, including some who had done business with the original Eastern, who said little had been heard about the re-invented airline's plans or its leadership.

"We do not comment on our customers," a COMAC spokesman said.

Once led by former World War I ace Eddie Rickenbacker and later by former Apollo astronaut Frank Borman, Miami-based Eastern Air Lines rose to become one of the largest airlines in the world before losing a battle against low-cost competition.

"We are still a young company. The start-up investment has not been finalized yet," Jack Shi, senior vice president for commercial development of Eastern Air Lines, told Reuters.

Shi addressed a packed hall of Chinese airline executives and media, but there were no other top executives present from the U.S. carrier which Shi said had been reconstituted in 2008 in Miami, the original hub of Eastern.

He said the airline, which included some previous employees of the bankrupted group, was shopping for planes to start services late next year from Miami to unspecified destinations in Latin America.

"Eastern used to be the largest U.S. airline to serve the Latin America market," he said. "A lot of preparation work needs to be done, such as applying for an air route."

Shi told his Chinese audience that once reborn, Eastern wanted to be the first operator to fly COMAC jets in the United States just as it had introduced the European Airbus there.

CONGRESS STEALS SPOTLIGHT

This week's air show is being attended by a record 650 exhibitors including dozens of foreign companies drawn to China by the growth of its aviation sector, projected to displace the United States as the world's largest aviation market soon.

But there was a notably low-key official presence as top regional representatives and government leaders congregated in Beijing for the ruling Communist Party's 18th Congress, marking a transitional period in Chinese leadership which has slowed the pace of business across many strategic sectors.

The exhibition featured prototypes of a new Chinese business aircraft and a model of a new stealth fighter that China apparently hopes to build for export.

Industry publication Aviation Week noted the model bore a "striking resemblance" to an aircraft recently photographed flying from the Shenyang Aircraft factory, which captured worldwide interest from military analysts and publications.

(Editing by Jeremy Laurence)

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