China’s Budget Carrier Boom is Big Business for Boeing
China has already established itself as the largest market for automobiles in the world, and thanks to recent relaxations on regulations governing local airlines, it might become one of the largest markets for aircraft as well, as Boeing (NYSE:BA) is getting a $3.8 billion taste of.
Juneyao Airlines Co., a major Chinese airline, is now able to launch a low-cost subsidy due to the aforementioned slackening of government control on the low-cost industry and is stocking its new unit with fifty Boeing 737 jets, including the next-generation 737 MAX planes. At list prices, these planes sell for between $76 million and $109.9 million, leading to a total cost of between $3.8 billion and $5.5 billion for the order, though manufacturers will often supply discounts on the list prices.
Boeing rival Airbus Group NV believes that China may overtake the U.S. as the largest aircraft market by 2032. Bloomberg reported that China’s Civil Aviation Administration said earlier this year that it would relax the regulations and explore tax breaks that would encourage budget carriers, as China Eastern ordered seventy Airbus A320s worth about $6.4 billion this past March.
“The low-cost carrier environment is getting increasingly friendlier,” Patrick Xu, a transportation and infrastructure analyst at Barclays told Bloomberg in a phone interview. “We are starting to see more start ups.”