China has agreed to buy eight more jets from Boeing Co. to help modernize its civil air fleet at a time when the country's national air carrier is undergoing major restructuring and reorganization, officials said today.
The contract with Boeing, the single biggest deal so far, calls for the Chinese to purchase one Boeing 747, two Boeing 767s and five Boeing 737-200s at an estimated cost of $350 million.
At a signing ceremony today, Hu Yizhou, director general of the Civil Aviation Administration of China (CAAC), said the restructuring of China's government monopoly over air services into a network of independent and competitive regional airlines will be completed in two years.
Over the years, CAAC has earned an international reputation for tardiness, lack of safety standards, and poor reservations and inflight service. The newly profit-conscious airline has taken China's economic reforms so much to heart that a CAAC stewardess recently was overheard charging a passenger for two aspirin.
Frequent hijacking incidents and plane crashes have lent new urgency to the need for reform in CAAC's flying practices and standards.
Hu said the Chinese government has given final approval to a plan first disclosed last year under which CAAC would retain its role as the national aviation regulatory body, but relinquish its operation of China's civilian air services to new and separate companies.
He said that the new airlines would be free to purchase any type of aircraft subject to the approval of CAAC. The decentralization is expected to spur already fierce competition among foreign airline companies for the growing China business.
"We will have further business deals to conclude in the future," he said. "This proves that the China market is very large; therefore, there is hope of business deals to be concluded for various airline firms."
CAAC now operates Boeing 707s, 737s and 747s, European Airbus Industrie's A310 airbuses, and Soviet Tupolev TU 154m's, as well as McDonnell Douglas MD80s and British Aerospace Tridents.
According to Hu, Boeing planes now form the major share of CAAC's imported fleet, although China also produces its own planes. Earlier this year, Boeing sold two 737-300s to the provincial administration of Yunnan. China now operates a total of 37 Boeing aircraft.
But in long-range coproduction agreements with China, McDonnell Douglas moved ahead of its competition this spring with a contract, estimated to be worth at least $800 million, to coproduce 26 jetliners for use by CAAC, 25 of which will be assembled in Shanghai.
So far, the Chinese government has announced the formation of five regional companies. Four of them will operate routes from their respective headquarters in Peking, Shanghai, Canton and Chengdu, while the fifth will specialize in helicopter services to offshore oil operations in the South China Sea.