Boeing Co. (BA:US) will sell 50 single-aisle 737 jets with a list value of at least $3.8 billion to a discount carrier being set up by China’s Juneyao Airlines Co. as the government eases controls on low-cost travel.
The purchase by Juneyao’s 9 Air subsidiary will consist of planes from the 737 Next Generation family and the upgraded Max, Boeing said in an e-mailed statement without giving a breakdown. That would value the deal at $3.8 billion to $5.5 billion based on retail prices. Buyers typically pay less than the sticker.
The sale is a boost for Chicago-based Boeing in an aircraft market that Airbus Group NV predicts will overtake the U.S. as the world’s largest by 2032. China’s Civil Aviation Administration in February said it would loosen regulations and study tax breaks to encourage budget carriers, while China Eastern Airlines Corp. in March ordered 70 Airbus A320s.
“The low-cost carrier environment is getting increasingly friendlier,” Patrick Xu, a transportation and infrastructure analyst at Barclays in Hong Kong, said in a phone interview. “We are starting to see more startups.”
Executives at 9 Air couldn’t be reached for comment.
Boeing fell 0.3 percent to $132.99 at the close in New York, extending its decline to 2.6 percent this year (BA:US). The Standard & Poor’s 500 Index has climbed 2.2 percent.
Narrow-body models such as the 737 and A320 are the workhorses of the global airline fleet, and are typically used on shorter routes. The 737 is the world’s most widely flown jetliner.
Economic growth is helping make air travel affordable to more Chinese, increasing demand for planes from carriers such as Air China Ltd. (1055) and China Southern Airlines Co.
Boeing will deliver about 140 aircraft to China this year, after handing over a record 143 planes in 2013, Marc Allen, the aircraft maker’s China president, said in January. Boeing, which delivered a record 648 jets worldwide, secured orders for more than 230 new aircraft from the country last year, he said.
Carriers have taken advantage of low-cost financing to replace older models with newer, more efficient jets. Boeing’s 1,355 net orders for 2013 were the second-highest annual sales tally, and an increase from 1,338 a year earlier.
China Southern, Asia’s biggest airline by passenger numbers, took deliveries of 37 aircraft last year, according to Boeing’s website. That was the second-most among carriers worldwide, lagging behind only American Airlines’ 39, according to the website.
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