China Eastern will buy 15 Airbus jets for $3.6bn

Aug 14, 2015, 4:52 PM EDT
This photo taken on August 28, 2014 shows a China Eastern Airlines plane taking off at Shanghai's Hongqiao airport. AFP PHOTO / JOHANNES EISELE

China Eastern will buy 15 Airbus jets for $3.6 billion. Airbus is scheduled to deliver seven A330s in 2017 and a further eight in 2018, China Eastern Airlines Corp (CEA.N) said in a statement to the Shanghai stock exchange, reports Reuters. "The company is purchasing 15 Airbus A330 planes to help to replace older planes that will retire over the next few years. It will also help to meet rising passenger demand for mid and long routes," China Eastern said.

China will be the world's largest air passenger market by 2034, according to the International Air Transport Association, attracting interest from foreign airlines. Delta Air Lines Inc (DAL.N) is poised to become the first U.S. carrier to own part of a Chinese peer, announcing plans last month to buy a 3.55 percent stake in China Eastern for $450 million and gaining an "observer" seat on its board. In a separate statement on Friday, China Eastern reported first-half net profit up sharply to 3.56 billion yuan ($557 million) from only 15 million yuan a year earlier, citing lower fuel prices and strong travel demand.

China’s devaluation of its currency Tuesday sent shares of the three big state-owned Chinese carriers plummeting as much as 28% on a single day on concerns that a weaker yuan will increase their cost of financing for aircraft purchases, which are largely settled in dollars, notes the Wall Street Journal. Continued weakness in the Chinese currency leaves the airlines laden with dollar-denominated debt that grows increasingly burdensome as the yuan weakens. The yuan has depreciated 4.4% in the past four days since China overhauled its exchange-rate mechanism by changing how it sets the central parity rate. The yuan stayed largely flat against the dollar during the first half of the year.