China Southern Air Logistics Company Limited has reached an agreement with Boeing to buy seven freighter aircraft, with the buyer securing options for three more of the same model family.
Under the contract, the airline logistics unit will take delivery of two B777F freighters and five B777-8F freighters. In addition to the initial seven-aircraft commitment, China Southern Air Logistics holds options to purchase three additional B777-8F aircraft.
The stated list price for the seven-aircraft order is about $3.618 billion. Should the company decide to exercise all three options, the cumulative list price would increase to roughly $5.240 billion. The latter figure is reported as equivalent to approximately 35.719 billion yuan, based on an exchange rate of 1 dollar to 6.8166 yuan.
The list-price figures encompass both the airframes and the engines. The parties have agreed concessions that reduce the ultimate purchase price below the published list totals.
China Southern Air Logistics executed the contract through its wholly-owned subsidiary, China Southern Airlines Cargo Company Limited. That subsidiary functions as a holding unit of China Southern Airlines Company Limited.
The agreement is conditional on formal approvals before it can take effect. Specifically, the transaction requires the green light from the company's general meeting of shareholders as well as authorization from the relevant state authorities. The company has stated that the transaction does not amount to a related-party transaction and is not classified as a major asset restructuring.
Summary of key transaction elements is as follows:
- Aircraft ordered: two B777F and five B777-8F.
- Options: three additional B777-8F aircraft available to the buyer.
- List price: approximately $3.618 billion for the initial seven jets; approximately $5.240 billion if options are exercised - equivalent to about 35.719 billion yuan at an exchange rate of 1 USD to 6.8166 CNY.
- Pricing scope: list prices include both airframes and engines; concessions reduce the final purchase price below list.
- Execution channel: transaction completed by China Southern Airlines Cargo Company Limited, a wholly-owned subsidiary and holding unit of China Southern Airlines Company Limited.
- Approvals required: shareholder meeting approval and authorization from relevant state authorities.
The acquisition and optional purchases, insofar as they progress to completion, will add to the freighter fleet commitments of China Southern Air Logistics and represent a multi-billion dollar order for Boeing pending the stated approvals.