June 30, 2015 / 4:54 PM / 2 years ago

China orders Airbus jets, factory agreement looms

People are silhouetted past a logo of the Airbus Group during the Airbus annual news conference in Colomiers, near Toulouse January 13, 2015.Regis Duvignau

PARIS (Reuters) - China placed a landmark order on Tuesday for dozens of wide-body jets from Airbus in a multi-billion-dollar deal that paves the way for a second European aircraft plant in the world's fastest-growing aviation market.

The deal, signed during a visit to France by Chinese Prime Minister Li Keqiang, includes a definitive purchase of 45 A330 aircraft, worth at least $11 billion at list prices, plus plans for a possible further 30 worth about $250 million each.

It was signed during a ceremony watched by business leaders and reporters at the French prime minister's office.

If the second part of the purchase is completed, the value of the contract could rise to $18 billion.

Sources familiar with the discussions had told Reuters last week that Beijing may purchase around 50-70 of wide-body jets in a breakthrough planes-for-investment deal with China.

Airbus has been negotiating for about 18 months to establish a cabin-completion center for wide-body aircraft in China alongside its existing final assembly plant for smaller A320 jets at the northern port city of Tianjin.

Fabrice Bregier, chief executive of the planemaking unit of Airbus Group (AIR.PA), said Airbus would press ahead with the project, which is expected to cost around 150 million euros.

"We are going to launch the project. I think we have a good base. We hope to have more orders in the future, but it's a project which makes a lot of sense and which gives us an advantage against our competition," Bregier told Reuters.

The agreement to build a plant capable of fitting out 2 A330s a month is due to be signed during a visit to Toulouse by Li on Thursday, but that part of the Chinese premier's visit has been overshadowed by a threatened air traffic controllers' strike.

Industry sources have said Airbus originally hoped to sell as many as 200 A330s to China, gambling on a 'Regional' version of its A330 long-haul jet to help deal with domestic congestion.

The final transaction is still large enough to secure production of one of Airbus's most profitable planes, but one which is heading towards a revamp after 20 years in the market.

Coming on top of a recent sale of 20 A330 planes to Saudi Arabia, it lifts uncertainty over Airbus's ability to meet recently reduced production targets while it prepares for the transition to the revised A330neo model from late 2017.

"This should help us a lot to maintain a production rate of six a month that we announced for the transition," Bregier said.

Airbus said the order for 45 jets was the largest for the A330 from China, which is projected to order a total of 5,300 jetliners over the next 20 years.

Editing by Mark John and William Hardy

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