China's BOC Aviation joins late Airbus order scramble

HONG KONG/PARIS Wed Jan 16, 2013 1:06am IST

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HONG KONG/PARIS (Reuters) - BOC Aviation, the aircraft leasing arm of Bank of China Ltd (601988.SS), has placed its largest ever order to buy 50 A320 family jets from Airbus EAD.PA at a list price of $5 billion.

The deal, signed in December, brings an end-year scramble of Airbus orders to more than 200 jets worth $25 billion in the past four weeks, and puts the European planemaker on course to report more than 900 orders for 2012.

But the European planemaker's winter offensive will not be enough to prevent Boeing (BA.N) reclaiming the lead in the $100 billion jet market when the final figures come out this week.

"After a couple of years of depressed market conditions, we are beginning to see that the market is turning," Robert Martin, BOC Aviation's managing director and chief executive officer, said on Tuesday.

"Now we are replenishing our pipeline. This is a leasing company. You want a pipeline of orders to grow your business going forward," he told Reuters.

The deal, which includes 25 revamped versions with new engines, comprises A320 and A321 variants with delivery scheduled from the second half of 2014 to the end of 2019.

With this deal, BOC Aviation's outstanding orders for new aircraft total 100, including planes from Airbus, its major rival Boeing Co (BA.N), and Embraer SA (EMBR3.SA). It also has 26 planes in the pipeline from purchase and lease back deals.

The list price of the deal is around $5 billion, but large orders typically involve substantial discounts on that price.

SEE-SAW BATTLE

Earlier this month, Reuters reported that Airbus looked set to report more than 900 orders for 2012, anticipating a surge in orders before the January 17 announcement.

Boeing is expected to win back the crown as top-selling planemaker after posting 1,339 orders for last year.

Airbus had led on orders since 2007 including a huge surge in 2011 when its share of the market dominated by both companies rose to a record 64 percent. Boeing hit back with a similar sales jackpot based on its own revamped 737 model last year.

Industry sources say Airbus is expected to end 2012 with a market share around 41 percent, but will talk up its performance when the last two unusually volatile years are combined.

Airbus will however acknowledge this week that it slipped behind Boeing in aircraft deliveries in 2012. Industry sources say it handed 588 aircraft to customers compared to Boeing's 601, giving the U.S. company a market share of 51 percent.

Airbus and Boeing traditionally have a roughly equal share of large jetliner sales but their fortunes have see-sawed in the past two years as first Airbus and then its U.S. rival brought out revamped versions of their best-selling medium-haul jets.

Market share is jealously guarded in an industry where higher volume quickly translates into lower costs.

Including the latest flurry, Airbus has so far announced 851 orders attributable to 2012. This excludes a $2 billion order for 10 jets from U.S. lessor CIT which is seen as a 2013 deal.

The global aviation market will need $4 trillion of new aircraft over the next 20 years, according to estimates from Boeing. Around half of those new planes are expected to be owned by leasing firms, and China will be a major growth market.

About half of that total by value will be for narrowbody jets like the A320 or competing Boeing 737 families.

Analysts say orders may slow this year but Turkish Airlines is shopping for as many as 150 jets this year. [ID:nL6N0AKFNH] Tunisian airline Syphax meanwhile announced a provisional order for up to 10 medium-haul jets on Tuesday. [ID:nL6N0AKAXZ]

As passenger traffic grows and the industry's center of gravity shifts towards Asia, cash-rich Chinese investors want greater exposure to the international aircraft leasing market.

BOC Aviation's assets are expected to rise by 25 percent to $10 billion in mid-2013 from $8 billion at the end of June 2012, Martin said.

Last month a Chinese consortium led by New China Trust agreed to buy nearly all of American International Group Inc's (AIG.N) aircraft leasing business ILFC for $4.8 billion.

(Reporting by Alison Leung; Editing by Anne Marie Roantree, Daniel Magnowski and Mark Potter; Editing by Anthony Barker)

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