Airbus plans to assemble about 300 A320 aircraft in Tianjin by the beginning of 2016, a senior company official said yesterday.

 

If the Tianjin factory can meet that target, Airbus will consider further cooperation in the northern port city, Marc Bertiaux, Airbus vice-president for cooperation and partnership with China, told China Daily in an exclusive interview.

 

Airbus and a Chinese consortium that includes China's two leading aviation manufacturers yesterday signed a joint venture contract to operate the Tianjin factory, which will start assembling the A320 family jet next summer.

 

The joint venture is 51 percent controlled by Airbus. The remaining shares are split between Tianjin Free Trade Zone Investment, representing the Tianjin government, which holds a 60 percent stake, and China Aviation Industry Corp I (AVIC I) and China Aviation Industry Corp II (AVIC II), each of which holds 20 percent.

 

Neither side of the joint venture released the investment volume.

 

Bertiaux said both sides have achieved "a good result of optimizing the costs." Profit will be shared according to the respective shareholdings, he said.

 

The Tianjin plant is expected to deliver the first A320 in the first half of 2009 and be able to assemble four jets per month by 2011.

 

The factory will likely be used to fill Airbus' two major Chinese orders it clinched over the past two years, said Li Lei, an aviation analyst with CITIC China Securities.

 

Airbus signed two orders with China in December 2005 and October 2006 for a total of 300 A320s.

 

At yesterday's ceremony, six domestic companies confirmed orders for 86 Airbus A320 family aircraft, worth a catalog price of about US$6 billion.

 

The orders are part of last October's agreement for as many as 150 A320 family aircraft Airbus clinched last October during then French president Jacques Chirac's state visit to China.

 

Shenzhen Airlines will buy 28 jets, with Sichuan Airlines getting 18 and Hainan Airlines 13. Privately owned Juneyao Airlines and Spring Airlines will each purchase six. The other 15 aircraft were ordered by China Aviation Supplies Import and Export Group Corp (CASGC). CASGC handles most of China's aircraft imports.

 

These aircraft will most likely be assembled and delivered in Tianjin, Airbus said.

 

Analysts said the Tianjin assembly line will not be initially profitable due to the relatively high costs and low profit margins of aircraft assembly.

 

Bertiaux said the costs to assemble aircraft in Tianjin would be "slightly higher than that in Europe".

 

"The local labor costs will be lower, but other costs are much higher," he said.

 

High cost factors include transporting the aircraft sections from Europe, hiring expatriate experts and the "learning curve" that the Chinese workers and engineers will face.

 

Li said China is not looking for profits from the venture, but to improve its aircraft manufacturing capabilities.

 

The joint venture's general manager will come from Airbus France and the Chinese consortium will nominate a deputy general manager, Bertiaux said.

 

"The operation and quality management of the factory, which requires our know-how, will be in hands of Airbus. Anything related to human resources, support and services will be arranged by our Chinese partners," Bertiaux said.

 

AVIC I and AVIC II will deploy up to 80 people to serve the joint venture for five years.

 

"They have promised that they will not send people we can easily find in Tianjin," said Bertiaux, adding that the factory will hire about 500 employees.

 

China has expressed a strong ambition to establish its own commercial aircraft industry, and AVIC I and AVIC II have been the two pillars of the Chinese aviation manufacturing industry.

 

(China Daily June 29, 2007)