Every industry might now be feeling the pinch of the global financial crisis, but few have been worse affected than the aviation sector.
In recent months, airline closures, lay-offs and delays in aircraft deliveries have been making the news in an industry reeling from the double impact of oscillating oil prices and the financial crisis.
So while this might seem a strange time for a delegation of some of the United States' most well-known aerospace firms to arrive in China looking to invest, the US aerospace industry is increasingly looking at China's aviation sector as an investment opportunity that might help them tide over their current troubles.
"There is a growing belief that the development of (aviation) markets in Russia, China and India will play a role in reducing the impact of the current crisis," said Francis Chao, managing director and publisher of the 'China Civil Aviation Report,' who is also a senior consultant to the delegation.
The mission is the first ever bilateral exchange between the world's two biggest aviation markets. In visits to Shanghai, Beijing, Suzhou and Guangzhou this week, US firms will meet local aviation companies and distributors, looking for joint-venture partnerships and supplier opportunities.
"In China, the aviation market has been growing very fast," Chao said. "It ranks second in the world for turnover, though there is still a big gap between China and the US. But it will continue to grow, as China needs a lot of regional airports and regional aircraft. China will build its own aircraft and have its own supply chain and capabilities. So it makes sense for US companies to have joint ventures here, and work with and help local manufacturers."
While the US aviation industry has been on a steady slowdown, the Chinese government has put in place an ambitious plan for expansion. China will have 42 more airports by 2010, its commercial fleet is set to grow from 1,100 to 1,600 by 2010, and it is forecast that the number of Chinese aircraft will increase fourfold by 2026.
For US firms, with their technical expertise, China's growing aviation sector presents investment opportunities they will not find in their own country. Several US firms played a major role in the development of China's first homemade passenger jet, the ARJ-21. The aerospace trade ties between the US and China have surged by 200 percent since 2003, reaching US$45.32 billion in 2007.
"US companies are excited by this opportunity," said Gwen B. Lyle, deputy co-leader of the delegation and commercial officer at the US Embassy in Beijing. "The companies are already well-placed in the Chinese market, and it's a large market. But this also represents a great opportunity for Chinese companies"
Henry H. Hart, of LeFiell, one of the oldest private aerospace firms in the US, said while American aerospace firms have been slow to look beyond their own shores, they are now realizing the benefits of going overseas as "globalization is the order of the day."
For smaller firms involved in aerospace support services, the recent slowdown has also had an unexpected silver lining. In recent years, while the aviation sector expanded in the US, the support services faced strain in keeping up with the growth.
"Aviation is a crucial piece of infrastructure for the world," said Hussein Lookmanjee of Flightparts LLC, which makes and provides parts and supplies for airlines. "Recent growth has outpaced anything we have seen before. I think the slowdown will allow the industry's support services to catch up, so in a sense, it might even make the industry stronger for future growth," Lookmanjee said.
(Shanghai Daily November 3, 2008)
