Forecasts for strong air traffic growth in Asia have fuelled the ambitions of several countries in the region to develop an airliner production capability.
If it were to happen, the new manufacturer would shake up an industry which has consolidated markedly in re-cent years. Having recently taken over McDonnell Douglas, Boeing now dominates world airliner markets, its only serious challenge coming from Airbus Industrie.
This duopoly makes it all the more difficult for fledgling aircraft industries to break into a business which calls for advanced technology and experience ?neither.of which can be acquired easily. Nevertheless, with China destined to rely increasingly upon air transport to pro-mote economic development, its desire to establish an airliner manufacturing facility is understandable.
China shares this ambition with several Asian countries ?although past experience should serve as a cautionary warning to those expecting quick results. For example, a consortium of Japanese manufacturers developed the YS-11 turboprop airliner during the 1960s, only for just over 180 to be built in total. Subsequent attempts by Japan to develop a 100-seat jet in partnership with Boeing ended in failure.
During the early 1990s, Boeing carried out a feasibility study to determine the market for a 'new small airplane' and went as far as signing a memorandum of understanding with the Japan Aircraft Development Company. Keeping its options open, the US company also con-ducted talks with China and South Korea with the objective of ensuring that what-ever 100-seat airliner finally emerged from the region, it would be compatible with its own range of airliners.
In recent years, both Airbus and Boeing have introduced a high degree of commonality on the flight decks of their airliners, so that pilots can switch from one to another with the minimum of con-version training. Consequently, when the question of international partnerships has arisen, the matter of commonality has been important.
Indonesia takes a lead
While Japan, South Korea, China and others have considered 100-seat jet air-liner projects, Indonesia's IPTN emerged as a regional leader in airliner design and development. The process of securing
certification from the major aviation authorities for Indonesian-built aircraft has often 'been pro rac4e tndaun such difficulties with its turboprop air-craft, IPTN has begun development of the N2130 family of jet airliners, seating between 104 and 132 passengers.
Meanwhile, drawing on their experience as partners in a business jet pro-gramme, Mitsubishi Heavy Industries and Canada's Bombardier Global Ex-press are carrying out a feasibility study into developing a family of regional jets seating 90 to 120 passengers.
In 1994, yet another attempt was made to establish an Asian airliner production capability when Seoul initiated the formation of an 'Asian Airbus' consortium to produce a 100-120 seat twinjet. This was a partnership which initially included Daewoo and Korean Air, as well as Aviation Industries of China (AVIC) and the Xi'an Aircraft Manufacturing Company of China. Other Asian companies regarded as potential collaborators included India's Hindustan Aeronautics.
It was predicted that the first airliner would roll out of Daewoo's Inchin plant by 1998. This forecast proved to be wildly optimistic, not least because China insisted that final assembly of the airliner should take place in one of its factories. Indeed, failure to reach agreement on this point eventually led South Korea to drop out of the new jet airliner programme and the Asian Airbus idea was quietly put aside.
Despite all the false starts, the concept of an Asian-produced 100-seat jet airliner was not allowed to fade, because of the perceived mutual advantages resulting from such a partnership. China continued negotiations with European companies and Boeing, recognising that it needed Western technology. However, none of the potential Western partners were willing to provide substantial funding for the venture, instead preferring to contribute technical and marketing ex- I pertise.
This stance actually satisfied all potential partners ?China needed technical assistance if a competitive product was to result, while the Western companies were content to see the production line set up in Asia, rather than in Europe or the US. However, while Boeing offered to contribute its expertise to the new venture, the European response was initially fragmented ?Dasa for example in 1995 proposing a 100-seat jet air-liner design based on a project developed by its Fokker subsidiary. Doubtless the German company sought to build on the putative success of an 89-seat airliner project which brought together MBB (later absorbed into Dasa) and China Aero-Technology Import & Export Corp.
However, this venture fell victim to China's international isolation after the Tiananmen Square killings in 1989 and, some years later, Dasa was unable to seize the leadership of the European bid to partner China again.
Aerospatiale of France led a more broadly European response which would also involve Italian and British industrial groups, these nations having by then pooled their resources in Aero International (Regional).. It was the Aerospatiale-led discussions which led to an agreement being concluded between AVIC, Singapore Technologies and a European consortium.
Although initial agreement was concluded between the Asian partners and Aero International, China opted for an Airbus-centred partnership. This led to the formation of Airbus Industrie Asia (AlA) which led the European side of the joint venture, adding Italy to the existing Airbus partners comprising France, Spain, Germany and the UK. AIA holds a 39 per cent shareholding in the venture, with AVIC taking 46 per cent and Singapore the remaining 15 per cent.
The partnership intends to make two versions of the airline ?the AE316 seating 96 passengers and the AE317 seating 125 passengers.
It is likely that final assembly will be undertaken by Xi'an Aircraft, rather than Shanghai Aircraft Manufacturing Factory previously considered favourite for the task, Both Chinese companies have some experience in producing airliners. Shanghai Aircraft has manufactured MD-82 aircraft under licence from McDonnell Douglas. This experience of having produced a modern jet airliner in series was initially thought sufficient to have swung the deal in its favour. However, there now seems greater velocity behind the claims of Xi'an, which is developing a regional expertise in air-
craft manufacture. Xi'an Aircraft has produced the An-24/26 turboprop air-liners under licence from Russia's Antonov, while more recently it has be-gun to manufacture rear sections of the ATR 72 airliner. Indeed, Aero International and China's AVIC have reached an agreement which could lead to the establishment of an assembly line for the ATR 72 at Xi'an, resulting in China be-coming the principal supplier to the Asian market for this twin turboprop aircraft. Market forecasts suggest a requirement for 100 ATR 72s in China alone over the next decade.
Access to technology
Although China has amassed consider-able experience in the licence production of military aircraft, it has produced only a few indigenous designs and has limited experience in developing airliners from scratch (see box).
By opting for a collaborative approach, China will gain access to the latest electronics technology needed to pro-duce a modern airliner. However, keeping all the partners sweet will be a challenge. While Singapore Technologies is currently signed up as a partner in the airliner venture, some reports suggest that it may be having second thoughts, not least because China has vetoed a proposal to sub-contract some of the work to Taiwan Aerospace. Following the earlier withdrawal of South Korea from the jet airliner programme, the loss of Singapore from the joint venture could be the start of another failure to form an Asian partnership.
With a potential world market estimated at some 5,400 jet aircraft in the 70-to 150-seat category over the next 20 years, Airbus Industrie Asia aims to win at least a 30 per cent share. Most of the demand will come from Asia ?a prospect that has not been lost on IPTN and Mitsubishi as they contemplate their jet airliner projects.
Although there is some capacity over-lap with the 124-seat A319 produced by Airbus in Europe, the AE316/317 will have flight decks similar to that of the A320 family, with common displays, controls and operational procedures. As a further move to achieve commonality with the European airliners, the new jets will also have the same handling characteristics.
The number of false starts and abandoned airliner projects in Asia are a use from scratch.
China does have quite extensive experience in building aircraft but it is largely confined to licensed production of Russian and French military aircraft. Examples of Chinese companies involved in development are rare. One is the K-8 jet trainer involving NAMC developing an entirely new design as a joint venture with Pakistan. Another is the EC-120 Colibri light helicopter programme bringing together AVIC and Singapore Technologies Aerospace.
The EC-120 is said to be the quietest helicopter in the world and its market potential is considerable, thus providing China with an opportunity to gain a major role in a successful civil aircraft programme. China's experience of working with Aerospatiale on the EC-120, as well as the earlier locally-produced Z-8 and Z-9 helicopters (both also French designs), possibly influenced its decision to form a partnership with Airbus Industrie rather than Boeing for the 100-seat jet airliner programme.
ful reminder that the AE316/317 is not yet a done deal. Indeed, the venture is still at the preliminary agreement stage and important matters have yet to be determined ?such as how many prototypes are to be built, where flight tests will be performed and when certification will be achieved.
Much work remains
Airbus expects the new aircraft to enter service by 2003, although much work must be done to achieve this target. For example, the engines have yet to be selected and responsibility for detailed de-sign must be allotted ?to say nothing of the commitment of funds for the launch costs. The A320 cost around US$1bn to launch and all concerned will want to be assured that there is a real market for the AE316/317 before putting finance in place.
So the AE316/317 may yet fail to progress from the drawing board. But if the programme can be brought to fruition by the partnership, Asia will have joined the limited ranks of modern airliner producers. The long-term benefits to China could be considerable.
China's grand plans
Demand for electricity in China is expected to grow to 250bn MVVh in 2010 from 98bn MWh in 1995, a growth rate of 6.4 per cent a year. The figures come from the report Asian Electricity prepared by the international research organisation MarketLine International and based on the Chinese government's long-term development plans to 2010.
Power to the countryside
To meet this growth in demand ?the fastest in North Asia ?installed generation capacity will increase from 217,224MW to 400,000MW by 2005. This works out at an average annual increase of 6.3 per cent a year. Electricity sales in China grew by an average of nine per cent a year between 1992 and 1996, but China's current per capita consumption of electricity ranks 80th in the world.
The main consumer is the industrial sector which accounted for 74 per cent of total demand in 1996, while only 10 percent of electricity usage was by individuals. In future, residential and commercial use is expected to increase be-cause of rapidly rising living standards and higher levels of ownship of electrical appliances. The goverment also plans to extend. electrification into the more remote parts of the countryside, where approximately 100m people are currently without electricity.
In 1996, thermal power accounted for 75 per cent of installed capacity and 81 per cent of power generation. Hydro-electricity was responsible for 24 and 18 per cent respectively, while just one per cent was attributable to nuclear power. All three types are set for expansion and China also plans to tap 1,000MW of wind power.
Already the biggest electricity consumer in Asia, China has been struggling to keep up with rising demand resulting from an average annual GDP growth rate of about 10 per cent. Internal reform is helping to promote efficiency. At the end of this year the National Power Corporation will replace the Ministry of Electric Power. It will oversee 16 regional and provincial power supply authorities. Each generates electricity and buys it from other sources, including private companies.
Central regulation and control of the inter-regional transmission network is the responsibility of the State Planning Commission, whose approval is essential for all major projects involving foreign capital. All foreign-invested projects in inland areas involving more than US$10m require SPC approval. Electricity prices are controlled, but new rules are being prepared under which prices could be set allowing power plants to cover costs, recoup investment and make a reasonable return.
Future targets cannot be achieved with-out foreign capital. Expansion plans under the Ninth Five-Year Plan (1996-2000) which will increase power generation by 87 per cent a year are estimated to cost at least US$64bn. Of this, 20 per cent, or US$12.9bn, will come from overseas. Private investment can take the form of commercial loans, build-operate-transfer (BOT) and build-own-operate-transfer projects and share-holding. At present, overseas investors are deterred from en-gaging in BOT projects because of restrictions on ownership and returns on investment, and by lack of a proper legislative framework. The contract negotiated between foreign bidders and the Chinese authorities on a BOT project at Laibin, Guangxi province, will provide a bench-mark to other investors interested in entering China's expanding power market.