Worsening Sino-French Ties Hurting Airbus

China could end negotiations for plane orders worth 15 billion dollars with Airbus of Europe.

While quoting two top executives at Airbus, Bloomberg said negotiations for 150 plane orders are underway with China, but Airbus might not be able to seal the deal this year. The contract might be up for talks again if the market turns around.

In response, Airbus said market conditions change and talks are still underway with China, following Bloomberg’s first coverage of the talks.

China Eastern Airlines, the country’s third-largest carrier, announced it will scrap its plane orders with Airbus, according to Bloomberg.

A source at the airliner was also quoted as saying, “Negotiations with Airbus will be suspended,” according to China’s Chengdu Business Daily.

“We recommended that carriers cancel or delay plane orders this year to cope with the economic slowdown and waning demand for travel,” confirmed the Civil Aviation Authority of China recently.

While Chinese media cited “economic issues” as the reason behind the possible cancellation of plane orders, those in the West looked to the recent deterioration of Sino-French relations.

Forbes interpreted China’s move as “a warning signal to Airbus,” while other Western media blamed France losing out due to worsening relations with China.

Sino-French relations have been undermined by a series of controversial incidents such as French President Nicolas Sarkozy’s meeting with Tibetan spiritual leader the Dalai Lama in December last year and Christie’s auctioning of two bronze sculptures taken from the imperial summer palace in Beijing despite China’s protest. The auction was held in Paris last week.

Prior to these developments, Airbus had grown aggressive in the Chinese market by setting up an assembly line outside Europe for the first time in Tianjin last year.

Cancellation of plane orders from China could deal a huge blow to Airbus since its combined orders will reach just 300 to 400 planes this year, a significant fall from last year’s 777.

Though Airbus is a joint consortium of France, Germany and the United Kingdom, the cancellation of plane orders is likely to hit France the most since the company is based in Toulouse, France.

China has signed a contract worth 10 billion dollars in Germany followed by a deal with the United Kingdom for two billion dollars worth of aircraft engines.

bonhong@donga.com