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China Southern Airlines

China Southern delays A380s, 787s, saving $1 billion  Apr 15, 2009

China Southern Airlines Co., the nation’s biggest carrier, will save $1 billion this year by delaying deliveries of Airbus SAS A380s and Boeing Co. 787s to pare growth amid the global recession.

The 13 787s and five A380s will now arrive from 2011, Board Secretary Xie Bing said today in Hong Kong. The carrier is also in talks to postpone four Boeing 777 freighters due this year, said Chief Financial Officer Xu Jiebo.

China Southern, the nation’s only A380 customer, and other Chinese carriers have slowed growth on overseas routes as business and leisure travelers pare trips on the slowing economy. The delays will hit Airbus and Boeing as the planemakers had counted on orders in China, Asia’s biggest aviation market, to help offset plunging demand in Europe and the U.S.

China Southern and its parent are also seeking further funds from the government to help pare debts, Chairman Si Xianmin said. Last year, the airline’s state-controlled parent won a 3 billion yuan ($439 million) capital injection after lobbying the government for more than two years, according to Si.

“How much we can get is up to the government,” Si said at a press conference. The parents of Air China Ltd. and China Eastern Airlines Corp. are also seeking government money, he added.

Slower Growth

China Eastern has also cut growth plans this year as it struggles with debt and overcapacity. Shanghai Airlines Co. was also in talks with Boeing about possibly canceling 787 orders because of quality problems, Chairman Zhou Chi said on March 26.

Airbus may fail to meet its target of delivering 18 A380s this year. The planemaker may only hand over 15 this year, according to Bloomberg survey of A380 customers earlier this month. Qantas Airways Ltd. is deferring four A380s, it said earlier this week.

China Southern had planned to use the A380 superjumbos, previously due to arrive from last year, to fly from Beijing to cities including Paris, London and New York. The 787s were earmarked for services including Guangzhou-Vancouver.

The carrier is due to receive 49 new planes this year, including the four 777 freighters it’s seeking to delay. It also plans to sell off or retire 23 older aircraft, as it replaces widebody planes with narrowbody A320s and 737s.

“We’ll complete restructuring our fleet in three to five years,” said Si.

The fleet should grow to 375 planes by the end of the year from 348 at the end of last year, Xu said. The carrier will spend 15.8 billion yuan on new planes this year, he added.

China Southern delays A380s, 787s, saving $1 billion
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