China Eastern cancels Boeing 787 Dreamliner order, goes with Airbus A330s

On October 17, China Eastern Airlines announced that it would be converting its order for 24 Boeing 787s into an order for 45 Boeing 737 narrowbodies, citing extended delivery delays for the 787 program. Additionally, the carrier announced an order for 15 Airbus A330 aircraft, while simultaneously selling its 5 Airbus A340-300s back to Airbus.

China Eastern Airlines Airbus A330-200. Image courtesy Wikimedia. Author Arcturus. Licensed under GFDL + cc-by-sa.

China Eastern’s Boeing 787 order was composed of 15 orders for the parent carrier, and 9 orders for China Eastern’s subsidiary Shanghai Airlines. Both orders were for the 787-8 variant. Their new 737 order is valued at $3.3 billion at list prices, though China Eastern has stated that it extracted “significant price concessions” from Boeing for the 737s. The new aircraft are planned for delivery beginning in 2014 and extending until 2016.

The order for 15 Airbus A330 aircraft will be delivered between 2013 and 2015. China Eastern did not specify which variant of A330 was chosen (-200 or -300), but gave the total list price of the aircraft to be US $2.53 billion. As part of the deal, China Eastern will return 5 Airbus A340-300 aircraft to Airbus in 2012.

China Eastern’s current widebody fleet is composed of 15 Airbus A330-300, 5 Airbus A330-200 aircraft (with 16 more on order from before), 5 Airbus A340-600 aircraft, 5 Airbus A340-300 aircraft, 7 Airbus A300 aircraft, and 7 Boeing 767s with its subsidiary Shanghai Airlines.

While China Eastern’s decision to drop the 787 order may not indicate current fuel price trends, there are valid reasons as to why it may have been cancelled. China Eastern has stated that it wants to focus its international growth on regional destinations; and the A330-300 could actually be more efficient on a seat-kilometer basis than the 787-8 for medium-haul routes.

Moreover, the A330-200 is a very capable aircraft. It’s payload is very similar to the design payload of the 787, and there are only a few destinations in China Eastern’s route network that cannot be served nonstop from Shanghai with A330-200s

Numerous aviation analysts have also predicted that early-build 787s may miss their weight and fuel burn targets by significant margins, which could potentially hurt the economic viability of pricier 787s.The cancellation drops Boeing’s 787 backlog to below 800 frames, and the airframer gave indication today that further cancellations may be forthcoming.

The sale of the A340s does beg the question of what China Eastern plans to do with its long-haul network short term; especially to North America. Currently, services to New York JFK and Los Angeles require A340s for range purposes, and the Shanghai-Vancouver route is on the edge of the A330s range, as are services to Rome and Western Europe. Given that the carrier will be left with just 5 Airbus A340-600s, perhaps they will elect to lease a long-range widebody twin for the interim; until they make the decision to order a new long-range aircraft.

Given the uncertainty in the global economy, and the troubles of both Boeing and Airbus in consistently delivering on their 787 and A350 programs respectively, such cancellations as the one employed by China Eastern might become more common in the coming months. Smart pragmatic decisions to reduce capital expenses might become just as important as cutting fuel bills; a perhaps cheaper, but more fuel thirsty A330 can be just as economical to operate as a more fuel efficient but pricier 787.

About Vinay Bhaskara

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