With new plant, Airbus seeks to secure China market share

Source:AFP Published: 2016-3-3 21:33:01

An audience gathers for a ground breaking ceremony for the Airbus Tianjin A330 Completion and Delivery Center on Wednesday in Tianjin. Photo: CFP

Europe's largest aircraft manufacturer Airbus started construction on Wednesday on a new facility to deliver wide-body planes in China, as it faces off against bitter US rival Boeing for market share in the country.

At a ceremony in the northern port of Tianjin, Airbus CEO Fabrice Bregier and Chinese officials officially broke ground for the Completion and Delivery Center that will produce two A330s a month.

The center is an expansion of the company's existing final assembly plant for A320 single-aisle aircraft in the city.

It comes at a time when China's economic growth is at its weakest in a quarter century and concerns over its outlook is sending shivers through global stock exchanges.

But Bregier said that "this is not true for our market," adding that increased middle-class incomes and loosened visa rules were driving a boom in Chinese air travel.

China is already Asia's biggest aircraft buyer as a growing middle class takes to the skies in ever-increasing numbers. The country is forecast to have 1.7 billion air passengers by 2034, and is poised in the next two decades to become the largest civil aviation market in the world.

The new $150 million center is the company's first such facility for wide-body aircraft outside Europe, and "marks a new milestone for Airbus' international footprint," Bregier said.

It will take flyable unpainted aircraft from their headquarters in Toulouse, France and add cabins, furnishings and paint, before they are delivered to customers.

Boeing also plans to open a completion center in China, it announced last year. The company sold 300 aircraft worth $38 billion during President Xi Jinping's visit to the US in 2015.

The two firms have been in a fierce battle for market share in China, where Airbus says it has gone from 27 percent in 2004 - before it opened the Tianjin final assembly line - to roughly 50 percent today.

The country is now Airbus' largest market, accounting for nearly a quarter of the planes it delivered in 2015.

Days before the ground-breaking, Air China announced orders for 12 wide-body aircraft for $2.9 billion.

"I understand that our competitor is trying to mimic the Airbus' strategy by opening a facility," CEO Bregier said in Tianjin, but he added that "it's not really state-of-the-art."

A Boeing spokesman retorted: "Partnership is defined by more than a few buildings," calling its relationships in the country "second to none" in supporting the development of Chinese aviation.

'Give and take'

China has made building its aerospace industry a strategic priority, considering it a crucial component of an advanced economy.

Investing in new plants in China is not only a way to increase production, but also a way to win the approval of the government, which controls the airline industry.

"Our industrial cooperation serves a purpose, and that purpose is to facilitate our sales ... to China," said Andreas Ockel, general manager of the Tianjin assembly facility. "It's a give and take."

The Airbus A320 assembly plant is a joint venture in which Chinese stakeholders control 49 percent, and the European firm has joint operations with partners across China manufacturing doors, wings and other parts for A320 family aircraft.

"In China the sales are not limited purely to the commercial dimension," said Eric Chen, president of Airbus China.

"You need also to explore industrial cooperation to reinforce the relationship," he noted.

For its part, Boeing has joint ventures in Boeing Tianjin Composites and Boeing Shanghai Aviation Services, and an innovation center for manufacturing.

But while it has encouraged partnerships with foreign firms, the government is investing heavily in building up domestic champions such as State-owned Commercial Aircraft Corp of China.

Airbus' Bregier acknowledged the threat of future Chinese competition, adding that cooperation only went so far.

"We will try to make their life as difficult as possible," he said. "I exclude in principle to support the development of a competitor."

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