Boeing to fly high in China with sale of 60 wide-body jets

Boeing confirmed yesterday in a Washington, D.C., signing ceremony an agreement to sell 60 of its new mid-size wide-body jets to the six major airlines in China, a deal worth $7.2 billion at nominal list prices.

Boeing also announced that the jet formerly called the 7E7 would henceforth be designated the 787, continuing the company's 7-series model numbering.

And it signaled that a substantial amount of work on the plane will be subcontracted to China.

Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines, Shanghai Airlines and Xiamen Airlines will each receive at least one jet in time for the opening of the 2008 Olympics in Beijing and deliveries are expected to be complete by 2012.

All six airlines will get the long-range 223-seat model, the 787-8. Boeing did not disclose how the 60 jets would be divided among the carriers.

In a conference call with journalists, Mike Bair, who heads the new jet program, said the redesignation of the model number to 787 was carefully timed to please its Chinese customers.

"We felt it was appropriate to honor this Chinese order in some way," Bair said. "The numeral 8 is good luck in China; 787-8s for the 2008 Olympics made a nice package for them."

Since the naming of the initial 707, Boeing's first and highly successful commercial jet, all of its airliners have been named in succession based on the 7-7 formula.

Boeing had announced in June that the new plane's rudder would be made in China, at the Chengdu plant of China Aviation Industry Corp.

Bair said yesterday that additional contract work will go to China through Boeing's major subcontracting partners. This suggests that some of the major Japanese work on the 787 airframe will be farmed out to China.

"Our expectation is that there's a fair amount of this airplane that ultimately is going to be produced in China," Bair said.

Although 60 percent of the commercial jets in China today are Boeing-made, Airbus has made strong gains there in recent years.

Airbus also formalized a deal yesterday that had been announced earlier: the sale of five super-jumbo A380s to China Southern Airlines, worth about $1.4 billion at list prices.

"Long term, the Chinese have decided that they want to balance their purchases," between Boeing and Airbus, Bair said.

Geopolitics complicates sales to China. The government of the People's Republic of China has been unhappy with a prospective U.S. arms sale to Taiwan, which it considers a breakaway province that is only temporarily independent.

According to sources in China and the U.S., negotiations around the Taiwan issue created delay in nailing down the Boeing order, which the company had originally expected to announce in 2004.

"I can't say for sure there was a political motivation around some of that delay," Bair responded when asked about the political issues.

Bair also announced minor changes to the 787's configuration. He confirmed that the number of seats has increased slightly to 223 seats in three classes on the standard long-range 787-8; 259 seats in three classes on the 787-9 stretch version; and 296 seats in two classes on the short-range 787-3 model.

In addition, the wing span of the two longer-range models has been lengthened by four feet to 197 feet.

Bair said that the use of light, strong composites for the wings allowed this performance-enhancing adjustment without adding weight.

"With composites we can make a lot thinner wing a lot longer," Bair said.

Boeing has a list of 186 announced orders for the 787, of which 56 are firm contracts. Details of the other 130 deals, including the Chinese order, will be finalized later.