The battle between Airbus and its perennial rival Boeing took a new turn with Airbus’s decision to build aircraft in the northern Chinese city of Tianjin.
The production facility will operate as a joint venture between the European aircraft maker, the Tianjin Free Trade Zone and the two Chinese airplane makers, AVIC I and AVIC II. It will build four A320 single-aisle planes per month by 2011.
Juan Silvestre, a China-based consultant hired to advise Airbus on structuring its joint venture, describes it as a “masterstroke.”
“They will also be able to reach the Asian market for passenger aircraft which is booming right now,” he explained.
Localization is a foundation of Airbus’s strategy to dislodge Boeing as the market leader in China. The US company came here 13 years ahead of Airbus and has a 64% market share, according to Airclaims, a London-based consultancy. But Airbus has been getting the bulk of China’s new orders since 2004. The Toulouse-based firm wants to control 50% of the market by 2013.
There’s plenty to play for in China. The country will spend US$280 billion tripling the size of its fleet to 3,900 planes by 2025, according to Beijing-based CCID Consulting. Most of the new jets will feed into domestic passenger and cargo routes.
China has also gleaned enough technology from working with Airbus, Boeing and other aircraft makers to be able to make its own single-aisle commercial airplanes. Having perfected a local 80-seat regional jet, AVIC is awaiting State Council permission to establish a large aircraft production line, likely in Shanghai, this spring.
As China catches up in this segment of the market, the Airbus-Boeing battle will focus on sales of larger jets. China will buy 660 medium-sized dual-aisle planes between now and 2025, predicts CCID’s Grace Gao. Jumbo jets account for 3% of all purchases and a third of these jumbo craft are cargo planes for China’s fast-growing air cargo market. As the country irons out its air freight system – it is building new hubs in Beijing, Shanghai and Guanghzou – there will be “far more demand” for freighter aircraft, Gao said.
The big question is whether Airbus and Boeing can deliver the jets on time and to specification. Both companies have massively stretched their backlogs, according to Doug McVitie, managing director of France-based consulting group Arran Aerospace. Airbus and Boeing will struggle to finish more than 500 airplanes a year, he said.
But, “it’s all systems go in Tianjin,” said Silvestre. “Airbus expects to deliver its first China-made A320 by the end of the year.