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European aircraft may profit from Sino-U.S. row

BEIJING: Airbus Industrie hopes to win a big China order as political differences between Beijing and the United States may be affecting business for its American competitors, officials and analysts said on Tuesday.

However, Airbus Industrie officials were tightlipped on reports that the company will sign a deal for as many as 40 aircraft during a tour by Chinese Premier Li Peng to the Toulouse headquarters of the four-nation European aircraft consortium this week.

Airbus Industrie officials and diplomats said they were hoping for a deal during Li's visit to France.

"Some sort of deal has been under negotiation since February and negotiations are still going on as far as we know," said one western diplomat. "We are hoping for a contract but even at this stage the number of planes is not certain."

Reports on the number of aircraft, including narrow-body A320s and several long-range A340s, have ranged from 25, worth about $1.2 billion, to as many as 40.

An Airbus Industrie official in Beijing declined to reveal how many planes might be included in a final order, but said the figure of 25 was incorrect.

She said many Chinese airlines had shown an interest in Airbus aircraft and 27 Airbus are already plying Chinese skies with another nine to be delivered later this year and in 1996.

"We hope that China will buy our aircraft and we are trying hard to convince our customers that the A320 is advanced in techology," the Airbus official said.

Airbus has a policy of announcing orders only when it receives customer authorisation.

The official said the A320 was expected to be popular in China because it carries 150 passengers and is economical in terms of training and maintenance while seats can be added to carry more passengers during peak travel periods -- such as the Chinese lunar new year when millions pack local transport.

"We are late entering the China market, so we have to work harder," she said.

An Airbus push into China took a step forward with the signing in February of its first sale to national carrier Air China of three long-range A340s.

It has sold 15 aircraft to China Eastern and six each to China Northern and China Northwest.

But Airbus still holds just about 10 percent of the China market while Boeing Co dominates with 70 percent.

However, Boeing hopes of signing more orders last month faded when Foreign Trade Minister Wu Yi cancelled a planned visit amid disputes over Taiwan and U.S. complaints of continued intellectual property piracy in China.

Another U.S. aircraft maker affected by the downturn in ties was McDonnell Douglas, which had planned to place final signatures on China's order for 40 aircraft during Wu's visit.

The delays in finalising the aircraft purchase contracts had forced the U.S.-based aircraft maker to take out financing, which would be offset in the final price, a senior McDonnell Douglas official based in Beijing said.

He declined to reveal the cost of the financing, but said $100 million was a "ballpark" figure.

China had made a firm commitment last September to purchase 40 MD-90 aircraft, including 20 being made in China, he said.

The delays meant McDonell Douglas was unable to receive 'progress payments' -- industry shorthand for downpayments to fund construction, the company official said.

"We are not at all nervous about this. It is just a delay and we don't see any risk of this contract not being fulfilled. We are on schedule for delivery of the first plane in July."

The 20 MD-90 (150 passenger) planes to be sold to China are to be delivered between July 1996 and mid-1999. The first of 20 other MD-90s, the made-in-China component of the deal, would be available in 1998.-Reuter