This is the first major deal involving Europe's Airbus and a Chinese airliner after the European Union agreed on November 12 to "stop the clock" for a year on plans to force non-EU airlines to adopt its Emissions Trading Scheme (ETS.L).

The new aircraft will help the airline satisfy rising demand for domestic medium- and short-haul passenger routes, China Eastern said on Friday. The deal is subject to approval by the airline's shareholders and mainland regulators.

In a filing to the Hong Kong Exchange after markets closed, China Eastern said it planned to fund the purchase from its working capital, commercial bank loans and other sources it didn't specify.

While this may increase its debt-to-equity ratio, the airline said it did not expect the deal to have a substantial impact on its cashflow position or its business operation.

China Eastern said it had also entered a disposal agreement with Airbus for eight of its Canadair Regional Jets and 10 Embraer Regional Jets that have a combined book value of 1.5 billion yuan.

These 18 aircraft are expected to be delivered to Airbus in stages from 2014 to 2016. China Eastern said it received these aircrafts between 2000 and 2007, which now have an average usage of about 8.2 years.

Airbus' Paris-listed shares was down 1.8 percent at 1120 GMT, having pared losses on the day. Shares of China Eastern Airlines rose 1.8 percent in Hong Kong and 0.3 percent in Shanghai on Friday. (Reporting by Clement Tan and Alison Leung; Editing by Muralikumar Anantharaman and Mark Potter)

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