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Sunday, October 24, 1999, updated at 16:27
Business China purchase steps up Airbus sales fight with Boeing

 The European aviation consortium, Airbus Industrie, has struck another major blow at its American rivals in securing a Chinese promise to buy 28 jets during a visit by President Jiang Zemin.

 The deal, potentially worth 2.3 billion euros (2.5 billion dollars), will go a long way to improving Airbus's share of the huge Chinese market.

 "China had halted purchases of aircraft and it is hugely significant that Jiang was persuaded to buy Airbus instead of Boeing," said London-based aviation consultant Nigel Waddington.

 Up to now, Airbus has been gradually increasing its share to around 20 percent of Chinese purchases while Boeing Corp of the United States has more than 60 percent. "That looks as though it is about to change," added Waddington.

 The deal was announced by President Jacques Chirac of France after a lunch Saturday in a top Lyon restaurant with the Chinese leader who is on a 17-day six nation tour of Europe and Arab nations.

 "It is good for Europe. It is good for France. It is good for employment," Chirac commented.

 The British government also welcomed the sale. "This is excellent news. With over 50 percent of Airbus constructed in the UK this order will help secure British jobs," said Trade Secretary Stephen Byers, speaking in London.

 "This contract was raised with the Chinese president during his visit (to Britain) this week and I am pleased we have received such a positive response so quickly," Byers added.

 China's decision was even more important as a plan for Airbus and a Chinese state firm, AVIC, to jointly develop a 100-seater jet collapsed last year.

 But two weeks ago, Airbus and AVIC signed an accord in Beijing for parts of Airbus wings to be made in China.

 According to Chirac, China will buy 28 jets, eight A-340s, 10 A-319s and 10 A-318s. AVIC will make part of the wings for the new 100-seater A-318s for assembly by British Aerospace, the British partner in the European consortium.

 Airbus and AVIC had previously been discussing a plan to jointly build a regional plane, codenamed the AE-100.

 But aviation industry sources said studies showed the development cost of about two billion dollars was too high to make the project profitable.

 The A-318, a shortened version of the A-319, will cost less as parts are based on the existing Airbus family of jets.

 The Airbus share of other world markets is almost level with Boeing, and China was a major target for the European enterprise.

 Experts say between 1,500 and 1,600 jets will be bought by China over the next 20 years as it replaces ageing Russian and Chinese built planes.

 But the Asian financial crisis after 1997 badly hit the Chinese aviation market and in February the government ordered a moratorium of at least a year on new purchases.

 The authorities said at the time that normal purchases would only start in around 2002.

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