Nov. 8 (Bloomberg) -- Cathay Pacific Airways Ltd., Hong Kong's largest airline, agreed to buy 17 Boeing Co. airplanes, valued at about $5.2 billion, because of China's rising travel and air-cargo demand.

The order comprises seven 777-300ERs and 10 747-8 cargo planes, the airline said in a Hong Kong stock exchange statement today. The carrier, which also took options for another 14 747-8 freighters, received ``significant price concessions,'' it added.

Cathay Pacific plans to expand its fleet as China's economic growth rate of at least 11 percent boosts travel and trade in the world's most populous country. The new freighters will replace older, less fuel-efficient planes, helping the airline cut its fuel bills as the price of oil nears $100 a barrel.

``Cathay needs more airplanes to support its expansion in mainland China,'' said Edward Wong, an analyst at Quam Ltd. in Hong Kong. ``China is expected to open its aviation market, and carriers need to get ready ahead of that.''

Cathay Pacific now has 30 commitments for the 777-300ER, including three already delivered, making it the largest customer for the plane in Asia, according to an e-mailed statement. The aircraft, all due before the end of 2012, will allow the carrier add services to North America, including a third daily flight to New York starting next week.

China Travel

Air travel in China grew 19.5 percent in the first half as economic growth made holidays and business trips affordable to more people. Cathay Pacific bought smaller rival Hong Kong Dragon Airlines Ltd. last year to add flights to the mainland. China and Hong Kong are Cathay Pacific's largest market, accounting for 43 percent of sales.

``Sometime in the future we will be ordering more aircraft to supplement frequency and capacity on our regional network,'' Chief Executive Tony Tyler told reporters in Hong Kong today. ``I am confident that we will continue to grow our fleet.''

The Cathay Pacific Group, including Dragonair and Air Hong Kong Ltd., a cargo venture with DHL, operates a combined total of 175 planes, according to the statement. That will rise to 196 by 2012, including 147 painted in Cathay Pacific colors.

The airline, a Hang Seng Index member, fell 2.9 percent in Hong Kong trading today before the announcement. The stock has climbed 6.4 percent this year, compared with a 44 percent gain for the benchmark index.

Freighter Fleet

Cathay Pacific, Asia's third-largest air-cargo carrier, currently operates 19 freighters. It has outstanding orders for another eight 747 cargo planes, due for delivery by 2009. The 747-8 freighters will be delivered between 2009 and 2012.

``We have huge confidence in the cargo business,'' said Chief Operating Officer John Slosar. ``Cargo is a cyclical business and it goes up and down, but the trend is definitely up from here.''

China's exports of toys, clothes and other goods surged 27 percent in the first nine months of the year. The global air- cargo market will likely grow 6.1 percent a year until 2026, according to Boeing.

Cathay Pacific plans to retire its seven 747-200 freighters by 2012. The 747-8 consumes 22 percent less fuel per revenue payload ton than the older planes, according to the carrier.

The price of jet fuel has surged 61 percent in Singapore in the past year, according to data compiled by Bloomberg. It rose 2.7 percent yesterday to $115.85 a barrel.

Fuel Costs

Fuel accounts for more than 30 percent of Cathay Pacific's costs and its share is increasing, said spokesman Dane Cheng. The airline intends to apply for permission to raise fuel surcharges further, he added.

The 747-8 freighter, due to enter service with Cargolux International SA in late 2009, will be able to carry 140 tons of cargo as far as 8,275 kilometers (4,475 miles). The 777-300ER can fly 365 passengers as far as 14,685 kilometers, according to Boeing's Web site.

Boeing fell 61 cents to $96.28 at 4 p.m. in New York Stock Exchange composite trading. The shares have risen 8.4 percent this year.

To contact the reporter for this story: Clare Cheung in Hong Kong at scheung4@bloomberg.net; Irene Shen in Shanghai at ishen4@bloomberg.net

Last Updated: November 8, 2007 16:38 EST