China Eastern reached an agreement with Boeing to substitute its order with 737s, Boeing’s workhorse single-aisle plane. Chicago-based Boeing said in a statement that China Eastern made the decision based on “operational considerations.”
The Chinese airline negotiated “significant price concessions” to lower the cost of the 737s below 2008 catalog prices totaling $3.3 billion, the airline said in its filing with the Hong Kong stock exchange. The planes will be delivered from 2014 to 2016.
“We don’t see this as a sign of further problems with the 787,” RBC Capital Markets analyst Robert Stallard said in a research note Monday. He added that Boeing may be able to re-sell some of the cancelled jets at higher prices, which would boost margins for the 787 project. He said “Boeing probably priced these 787s to China quite aggressively.”
Along with the renegotiated Boeing deal, China Eastern also procured 15 Airbus A330s. From BusinessWeek:
“Airlines are generally reluctant to take early deliveries of the 787, given the well-publicized problems with weight and the usual entry-into-service challenges,” said Rob Stallard, an analyst with RBC Capital Markets in New York. “On the flip side, Boeing could have some open delivery slots for the 737NG around the middle of the decade, as it gets ready for initial shipments of the MAX.”
China Eastern chose the A330, which carries 250 to 300 passengers, as the “near-term solution compared to the 787,” which seats up to 290, said Stefan Schaffrath, a spokesman for Airbus in Toulouse, France.