China Eastern Airlines, the nation's third largest carrier, has placed a US$924 million order for 16 Boeing 737 aircraft to expand its domestic fleet, the company said in a notice to the Shanghai Stock Exchange yesterday.

The deal is part of a US$5 billion order for as many as 80 Boeing planes that is due to be signed today in Washington during Chinese Vice-Premier Wu Yi's visit to the United States, a source close to the deal told China Daily yesterday. Boeing's contract may be announced at a summit sponsored by the US Commerce Department.

The mega deal, plus a previous one signed last November for 70 B737s, may help Chicago-based Boeing keep its sales lead over Europe's Airbus in China.

The 80 aircraft will all be single-aisle B737-700 and B737-800 models, said the source, who declined to be named.

Besides China Eastern, seven other Chinese carriers China Southern Airlines, Air China, Hainan Airlines, Shanghai Airlines, Shenzhen Airlines, Xiamen Airlines, Shandong Airlines will receive the aircraft, earlier media reports said.

"The large purchase for mid-range airplanes such as B737s reflects the rising market demand for domestic air travel in China," said Liu Weimin, director of the Aviation Laws Research Centre at the Civil Aviation Management Institute of China.

"With their disposable incomes increasing, a growing number of Chinese will choose airplanes as the ideal choice for domestic travel."

"Sticking to a few fleet types also helps airlines lower operating costs in terms of maintenance, repairs and personnel training," Liu added.

China Eastern said in the notice that the order for the new airplanes would "satisfy the fast growing market demand for mid and short-range domestic air travel in the coming years" and would help the carrier strengthen its mid and short-range air route network in China.

The General Administration of Civil Aviation of China said China would have 1,580 aircraft by 2010, nearly double the current number. Chinese carriers may buy about 2,600 new aircraft by 2024, according to a Boeing forecast released last year.

The US aircraft manufacturer sold its first plane to China in 1972, 13 years ahead of Airbus. Boeing controlled 61 percent of China's commercial airplane market by the end of last year.

Airbus signed its largest single deal when it sold 150 A320s to six Chinese airlines at the end of last year when Premier Wen Jiabao visited France. The deal is worth nearly US$10 billion.

According to a memorandum of understanding signed during the premier's trip to France, China will become the first country outside Europe to build Airbus aircraft. Tianjin, Shanghai, Xi'an of Shaanxi Province and Zhuhai of Guangdong Province are four candidate cities for the final assembling line for the A320 family single-aisle aircraft.

Also yesterday, China Eastern reported a net loss of 438.7 million yuan (US$54.5 million) for 2005 under international accounting standard, compared with a 2004 profit of 456.4 million yuan (US$56.7 million).

The Shanghai-based carrier said it suffered from a 64 percent jump in fuel costs and a 61 percent increase in maintenance costs after it expanded its fleet last year.

(China Daily April 12, 2006)