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China to freeze aircraft orders in 2005
Updated: 2004-12-30 11:13

China will not approve any new commercial aircraft purchases in 2005 in an effort to curb "over-heated" growth in the sector and uncontrolled capacity expansion by domestic airlines, Reuters quoted a Chinese government official as saying.

Even though aircraft manufacturer Boeing Co., and a few analysts said the company will not be affected by the decision, Boeing shares fell more than 2 percent on the news.

Yang Yuanyuan, director general of the General Administration of Civil Aviation of China, told a Chinese industry forum this week that domestic airlines have already ordered enough planes to meet their requirements next year.

"Chinese airlines have already bought and arranged to be shipped next year a total of 147 planes," Yang said in comments published on the Web site of CAAC News, a newspaper run by the aviation agency.

"This basically suits the needs of the market's growth," he said, adding that no additional purchases will be approved in 2005.

The move comes amid efforts by aircraft manufacturers Boeing and Airbus to tap into China's growth.

Both aircraft makers are currently discussing deals with China, trying to sell the country their latest and most expensive planes -- the Boeing 7E7 wide-body jet and the Airbus superjumbo A380 aircraft.

Boeing said the decision to freeze orders in 2005 will have no impact on its ongoing discussions. "We are looking at what their plans are beyond 2005," Bob Saling, a Boeing spokesman told Reuters on Wednesday. "This does not affect our ongoing discussions with them. They continue to be a strong growth market for us."

Prudential Equity Group analyst Jared Muroff also said China's plans will not impact Boeing's delivery pattern in 2005. "Chinese orders for the 7E7 should be unaffected by this policy as the plane will not ship until 2008," he added.

Still, Boeing shares fell $1.15, or 2.2 percent, to $52.09 in early afternoon trading on the New York Stock Exchange.

Airbus officials were not immediately available for comment.

Air travel is taking off in China, fueled by rising incomes, a growing number of approved tourist destinations for its 1.3 billion people, and accelerating business travel.

U.S. aircraft manufacturer Boeing has predicted that China, within 20 years, will become the world's second-largest commercial aviation market, behind the United States.

The company said China will need 2,300 planes over the next two decades, as increasingly well-off Chinese take to the air. It is slugging it out with European competitor Airbus EADS for a share of new aircraft orders.

China Eastern Airlines, which commands the country's second-largest commercial fleet, on Friday said it will buy six Boeing Co. 737-700 jets for about $240 million to meet booming air travel demand. Those planes will be delivered in 2006.

In October, Airbus confirmed an order for 20 of its A330 wide-body jets for China Eastern.

It was reported last week that Shanghai should see traffic rise by almost half this year, to about 36 million passengers.

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