The announcement of a $50 billion order by China for Boeing aircraft coincides with an unseemly scrap for the Airbus aircraft ordered four years ago.

Some carriers are set to miss out on their request for Airbus A320s and A321s as demand outstrips the 30 aircraft ordered by China Aviation Supplies Corporation (CASC). China Eastern and China Southern may end up as the sole beneficiaries. Chinese regulations dictate only a certain number of aircraft can be allocated to each of the carriers under the CASC's auspces.

While the narrowbody Airbus equipment is proving easy, the reverse is true for the A340s which until recently were seen as unwanted goods. Although Chengdu-based China Southwest Airlines has now agreed to give a home to three of the six A340s CASC ordered four years ago, CASC has faced a plethora of problems getting rid of the aircraft.

In early 1994 Captain Yu, China Southern's outspoken president, turned down the CASC's demand to take all six A340s on board. CASC backed off and persuaded Air China to take three of the jets and China Eastern the other three. Air China agreed to take the aircraft, taking delivery of one of its A340s in October 1997, with the other two slated for November. China Eastern, however, then declined, forcing CASC to push the three A340s onto China Southwest.

China Eastern's decision to turn down the A340s caught most analysts by surprise, particularly since China Eastern is happy with the two A340-200s it has been operating since mid-1996.

China Eastern's decision was reportedly spurred by its current focus on profitable domestic operations - underscored by its recent decision to lease ten A320s- as the airline is reportedly losing money on international routes.

China Eastern's rejection of the A340s is also linked to China Southern's rejection of the same aircraft. As one close observer points out: 'Why should China Eastern take these planes that China Southern didn't want? This doesn't have anything to do with the airplane. It's purely politics.'

China Southwest may be too charitable in giving the orphan A340s a home. What China Southwest intends to do with aircraft designed for routes much longer than it now flies remains to be seen. One theory is that the four-engined A340s will provide more margin for error on China Southwest flights from Tibet, solving CAAC's concerns about Southwest's use of B757s aircraft at Lhasa's high altitude.

The other theory is that China Southwest will use its acceptance of the A340s as a bargaining chip to gain longer routes and introduce international services to its network. 'I don't think that's a precondition,' says one insider, 'but in China one way for airlines to get international routes is to order large aircraft.'

David Knibb

Source: Airline Business