Chinese flag carrier Air China said late on Friday that it would buy 20 Boeing (BA) 737-800 airplanes for $1.4 billion. The planes will be delivered between 2013 and 2015.
With this acquisition, Air China aims to expand its fleet capacity by about 5% from December 2009, based on available tonne kilometers, to meet growing demand. It may also increase the frequency of flights, Reuters reported the carrier said in a statement to the Hong Kong stock exchange.
Air China noted that while the list price for the short-to-medium range planes amounted to $1.4 billion, it had been granted "significant price concessions."
Earlier this year Beijing imposed sanctions on U.S. companies involved in arms sales to Taiwan. There was concern Boeing might be affected.
Chinese airlines are benefiting from solid air traffic growth in China, and the purchase will reinforce the company's domestic market share, the company said.
Air China said it will mainly use cash and bank loans to finance the purchase.
Bloomberg reports that two transactions during premarket trading involving Boeing shares showed they sank 44% today before rebounding to within $1 of Friday's closing price. BA shares tumbled to $38.77 at 7:14 a.m. today, but traded around $67.90 shortly after the open, down 1.2%.
Investing Like Warren Buffett
Learn from one of the world's best investors.View Course »