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Air China says no change in Airbus orders

By Alison Leung

HONG KONG/TAIPEI (Reuters) - Air China Ltd <0753.HK><601111.SS> has not cut or cancelled any Airbus orders and is sticking to the delivery plan for the aircraft, it said on Thursday, adding that it plans to expand capacity.

China has suspended the purchase of a total 55 Airbus jets, including 45 long-haul A330s and 10 Airbus A380 superjumbos worth a total of $14 billion amid a trade row over European Union airline emissions charges.

"The stand of our central government is consistent, that is to oppose firmly the EU's unilateral move to impose a carbon tax. The attitude of Air China is the same as our government," Wang Changshun, chairman of the national flag carrier, told reporters at a results briefing.

"Until now I have not received any formal information," Wang said when asked if Air China had cancelled any Airbus orders.

Air China would stick to its plan to take delivery of 35 new aircraft this year, including 14 A320/A310 and 6 A330 from Airbus, board secretary Rao Xinyu said.

The company called for negotiations to resolve a row over the European Union carbon scheme.

"We hope the EU can conduct bilateral talks with the Chinese government to solve the dispute," Wang said.

The row is over a cap-and-trade scheme which could levy charges for carbon emissions for flights into and out of Europe. The scheme has angered countries including China, India and the United States.

The charge would increase Air China's costs by 200-300 million yuan ($32-48 million) a year, and the cost for the entire Chinese airline industry could reach $100 million a year, Air China Senior Vice President Zhao Xiaohang said at an industry event in Taipei.

The EU aims to reduce emissions via the ETS but it would not achieve this goal, Zhao said earlier on Thursday.

"It won't raise social awareness of the issue or lead to more action, it will only increase the burden on airlines and travelers," he added.

EXPANDING

Air China plans to expand its capacity and rebalance its domestic and international network amid challenges ahead.

"We will expand (passenger) capacity by 8 percent on domestic routes and 12 percent on international routes this year," Wang said.

Looking ahead, steady economy growth in China would bring new opportunities in the aviation industry but slowing growth in the United States, a continued debt crisis in Europe and rising fuel costs would put pressure on Air China, he said.

Earlier this month, industry group the International Air Transport Association cut its forecast for global airline profits this year due to a sharp rise in oil prices, saying a spike to $150 per barrel could lead to losses as high as $5.3 billion.

Jet fuel costs rose 44 percent in 2011 and accounted for more than a third of Air China's operating expenses.

The carrier reported a 41 percent drop in 2011 net profit to 7.08 billion yuan ($1.12 billion) on rising costs, a continuing recession in the international air passenger market and a significant decline in air cargo operations.

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For company results please read:

http://www.hkexnews.hk/listedco/listconews/sehk/2012/0327/LTN201203271629.pdf

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At the end of 2011, its fleet comprised 432 aircraft with an average age of 6.77 years.

Air China has orders for a total of 51 Airbus planes to be delivered by 2014, including 30 A320/310 and 21 A330, the company said.

($1 = 6.3060 Chinese yuan)

(Additional Reporting by Lin Miaojung in Taipei; Editing by Michael Watson)

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