Spend 100 C919s at once

Securities Times E Company

2024-04-26 21:54Published on the official account of "Company E" under Guangdong Securities Times

Domestic large aircraft have signed large orders again!

The picture is from the Times Financial Gallery

Air China (601111) disclosed on the evening of April 26 that with the approval of the board of directors, the company signed an agreement with Commercial Aircraft Corporation of China (hereinafter referred to as "COMAC") to purchase 100 C919 aircraft from COMAC. The aircraft is scheduled to be delivered to Air China in batches between 2024 and 2031.

The reporter of Securities Times E Company noted that this is the second large order for domestic large aircraft after signing an order for 100 C919 with China Eastern Airlines (600115) last year.

According to Air China's announcement, the target of the company's purchase is 100 C919 aircraft (extended range). According to the latest list price provided by COMAC, the base price of the 100 C919 aircraft adds up to about $10.8 billion. After fair negotiation between the buyer and the seller, COMAC granted the company a relatively large price concession for the purchase of the aircraft, so the actual consideration of the transaction was lower than the basic price of the aforesaid aircraft.

As of the end of last year, Air China's monetary fund balance was 15.628 billion yuan. The company said it would finance the transaction with its own funds, commercial bank loans and other financing. The Company does not anticipate any material impact on its cash flow position or business operations as a result of the transaction.

Air China believes that the above transaction will be conducive to optimizing its fleet structure and long-term capacity replenishment. "The transaction will expand the carrying capacity of the Group's fleet, taking into account adjustments such as aircraft withdrawals that may be made to the fleet based on market conditions and age, and will increase the Group's capacity by approximately 7.5% based on the Group's available tonne-kilometres as of December 31, 2023. The company said.

According to the data, as of the end of 2023, Air China has a total fleet of 905 aircraft, with an average age of 9.36 years. The aircraft are dominated by Airbus and Boeing, with a small number of ARJ21s.

In late December 2023, Air China announced a private placement plan, which intends to raise no more than 6 billion yuan from its controlling shareholder, AVIC Group, for the introduction of 17 aircraft projects and replenishment of working capital. In addition, the company also intends to issue H shares to AVIC Limited, raising a total of no more than HK$2 billion.

Of the 6 billion yuan raised, 4.2 billion yuan is planned to be used to introduce 17 domestic aircraft, including 6 C919 and 11 ARJ21. Deliveries will take place from 2024 to 2025. Based on the catalogue unit price provided by COMAC, the total investment in the 17 aircraft totaled US$1.066 billion. Among them, the 2024 catalog unit price of C919 is $108 million.

In addition to Air China, China Eastern Airlines is also purchasing large domestic aircraft. In September last year, the company announced that it had signed a C919 Aircraft Sale and Purchase Agreement with Commercial Aircraft to purchase 100 C919s from the other party. The aircraft, with a combined list price of approximately US$9.9 billion, are scheduled to be delivered to China Eastern in tranches between 2024 and 2031.

In comparison, the unit price of China Eastern Airlines to buy C919 seems to be lower. However, China Eastern is based on the 2023 catalogue price, and Air China is based on the 2024 catalogue price. In addition, China Eastern Airlines buys the basic type, while Air China buys the extended range type.

At the beginning of April, China Eastern Airlines said at the performance briefing that the company, as the world's first user of the C919, has received and operated five aircraft so far. In 2024, the company plans to introduce six C919s.

C919 is a large jet airliner that is well-known to the public, developed by the mainland and has independent intellectual property rights, and it has high hopes from the Chinese people.

At the beginning of this year, the 2024 National Civil Aviation Work Conference was held in Beijing, at which it was proposed to promote the accreditation review of C919 aircraft EASA (European Aviation Safety Agency) and promote domestic civil aircraft to go abroad.

In mid-February, a C919 aircraft arrived in Singapore for the Singapore Airshow 2024. On the opening day of the Singapore Air Show, Tibet Airlines signed an order with COMAC for 40 C919 and 10 ARJ21 aircraft. At the beginning of March, C919 flew to Laos and Cambodia one after another, and was displayed at the local airport.

Jianghai Securities previously pointed out that the demand for new passenger aircraft in the global aviation market is huge, and domestic aircraft have ushered in development opportunities. According to relevant data, the next 20 years will usher in the peak period of jetliner deliveries as 75.2% of the existing fleet will be replaced and the aviation market continues to grow. About 42,400 jetliners will be delivered globally, with a total value of nearly $6.4 trillion.

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