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Australian Airline Signs Multi-Billion Dollar Contract With Boeing - 2003-01-20

Australia's budget airline Virgin Blue has placed orders for up to 50 Boeing 737 jets - in a deal worth about $3 billion.

Australia's second largest air carrier says it plans to expand its services to destinations in the Pacific and eventually to Asian cities such as Hong Kong, Shanghai, Tokyo, Bali and New Zealand. The expansion will put Virgin Blue into greater competition with Australia's main carrier, Qantas.

Philip Wickham is an aviation analyst with ING investment bank in Asia. He says Qantas has held an overwhelming 80 to 85 percent of the market share since domestic rival, Ansett, folded last year. "In my view what's going on is, Virgin Blue is quickly trying to move into this space that used to be occupied by Ansett. And if they don't quickly occupy it, there is always a chance of a third airline emerging in Australia. There's always talk of Singapore Airlines potentially funding a new airline."

Other analysts say, however, that Virgin Blue's expansion may be expensive and risky. Qantas is already embarking on aggressive costs cutting measures.

Also in Australia, the government is blaming the continued rise in unemployment on the country's worst drought in a century. The Bureau of Statistics says the jobless rate increased from 6.1 percent in November to 6.2 percent in December, its fourth consecutive rise in as many months.

Government officials say the drought is directly responsible for the loss of about 70,000 jobs, or they predict unemployment would have dropped slightly.

In China, the government announced new rules requiring Chinese companies and local governments to seek state approval before borrowing from foreign lenders. The rules, which appeared in state-run financial newspapers, are to take effect on March first. The announcement comes four years after the country's largest ever-corporate failure. In 1998, state-owned Guangdong International Trust and Investment defaulted on more than $4.7 billion of foreign debt after the central government refused to bail the company out.

The new rules clarify the central government's policy that it will not be responsible for firms and government-owned companies failing to repay foreign loans.