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FOCUS - Airbus deal could lead to China becoming jet production hub

7-Dec-2005

SHANGHAI (XFNews) - Promises of aerospace technology transfers that helped Airbus clinch its largest-ever order from China could be the first step towards the Asian nation becoming a jet production hub, analysts said.

A key incentive of allowing China to produce Airbus jets for the first time was attached to the deal clinched yesterday for up to 150 mid-range A320 planes worth nearly 10 bln usd at list prices.

The cooperation protocol agreed to a day earlier foresees the "possibility" of establishing an Airbus assembly plant in China that would turn out single-aisle planes such as the A320.

"It's a very clever move as it obviously brings China into the equation in terms of developing its own capacity," said Ian Thomas, an analyst at the Sydney-based Centre for Asia Pacific Aviation, according to Agence France-Presse.

"China has a fledgling aircraft manufacturing operation of its own that is nowhere near in the same league as either Airbus or Boeing but no doubt would like to be.

"So from that point of view it brings a lot of value to China... and to actually set up a manufacturing facility in that country is a big bonus."

China has repeatedly stated its ambitions of building large passenger jets by 2020 although it is still struggling to develop a market for domestically built jets of 70 to 90 seats.

The secretary general of European aerospace and defence equipment body GEAD, Olivier Gorge, has already warned that Europe's aviation industry needed to be careful not to give away all its trade secrets in its rush to win business in China.

"It is necessary to be sure, therefore, that French technology in terms of aerospace equipment does not go to China through production sub-contracting," Gorge told Agence France-Presse in an interview last week.
"There have been examples in the past of some parts suppliers returning from China having seen piracy of their technology."

However, if Airbus does proceed with producing jets in China, Thomas said the European conglomerate may well gain an edge over Boeing, its arch rival from the United States.

"There is some political resistance in the US... there are political issues concerning protection of jobs within in the US," said Thomas.

"Boeing is hamstrung, it's a private company but because of its size and importance to the US economy it is essentially an arm of the US economy."

As part of the wide-ranging accord signed during a visit to France by Chinese Premier Wen Jiabao, Airbus also offered China a five pct stake in its A350 aircraft program.

The A350 is the European group's response to Boeing's new generation 787 "Dreamliner" passenger jets.
Airbus has yet to receive any orders from China for its A350 aircraft whereas Boeing signed a deal with Beijing in January to sell 60 of its "Dreamliners".

"That (A350 orders) will be the next big milestone achievement for Airbus in the Chinese market," said Derek Sadubin, another analyst with the Centre for Asia Pacific Aviation.

In the battle for supremacy of the skies in China and around the globe US aerospace giant Boeing says it has booked 800 commercial plane orders in the first 11 months of 2005, giving it an apparent lead over European rival Airbus.

Airbus, which has been the market leader in recent years, says it has booked 494 orders as of October, compared with 674 for Boeing for the same period. Airbus is due to release new figures this week.

But the new course taken by Airbus to more closely integrate China into its operations may just be enough to allow it to overtake its US rival, especially in China.

Boeing, which has over 70 pct of China's market, predicts the industry will need 2,600 new planes, quadrupling the nation's present fleet, over the next 20 years.

Airbus, a government-run aerospace conglomerate that includes Germany and Spain, wants to grab 50 pct of the market share over the next eight years.


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