China Eastern cancels Boeing 787 order

China Eastern Airlines has announced that it would be cancelling its order for 24 Boeing 787s and instead order 45 Boeing 737 variants, the airline has cited extended delivery delays for the cancellation. In addition the carrier plans to order 15 Airbus A330 aircraft which will be delivered between 2013 and 2015, it also intends to sell its 5 Airbus A340-300s back to Airbus in 2012.

China Eastern’s Boeing 787 order book for the 787-8 variant consisted of 15 orders for the parent carrier, and 9 orders for China Eastern’s subsidiary Shanghai Airlines. The airline’s 737 order is valued at $3.3 billion at list prices.The new aircraft are expected to be delivered to the airline starting 2014 and until 2016.

Given that China Eastern’s latest growth strategy focuses on building up its network in the regional international market, it makes much more sense for them to go for the 737’s and A330’s as they have proven to be more fuel efficient for such routes and also as it is known that early-build 787s may miss their weight and fuel burn targets by significant margins, which will potentially hurt the economic viability of pricier 787s. China Eastern’s decision seems to be based on hard facts and financially driven. With this, the order cancellations have caused the Boeing’s 787 backlog to drop below 800 frames with Boeing indicating further cancellations may be forthcoming.It needs to be seen how well does Boeing manages this negative backlash for their new technology and China Eastern’s strategy play given that the market they are targeting is going to see some fierce competition in the coming years with many big players like Singapore Airlines, Qantas, Cathay Pacific and other Chinese carriers bringing in either their focused subsidiaries or directly launching flights on their own network to cater from Low Cost to Premium customers.