China Eastern Airlines, the country's third largest carrier, announced today it has signed a contract to buy 20 Airbus A320 planes for about 9.9 billion yuan ($1.4 billion).
The agreement was signed in Paris on June 15 local time. The 20 A320s were part of the orders of 110 A320s Airbus had secured from the Chinese government in 2007. Delivery of the aircraft to the airline is scheduled to begin in 2011 and finish in 2013.
A320, the one-aisle airplane, is a best-seller of Airbus. It has 150 seats and is mainly used in short and medium routes.
This deal was passed unanimously by the China Eastern' board of directors, and is waiting for approval from the aviation authorities.
The orders will be largely funded by bank loans, the airline said.
China Eastern has been under spotlight recently over its merger plan with Shanghai Airlines, both of which reported heavy losses last year. In the context of the global aviation market recession, the buying spree raised a few eyebrows.
However, China Eastern explained that although its asset-liability ratio will rise in the short term, the carrier's day-to-day cash flow and continued viability will not be negatively influenced.
This purchase was made to meet the increasing demand of the domestic air passenger market in the next few years, it said.