Airbus China plant opens door to massive market

TIANJIN: In a series of vast hangars, dozens of Chinese technicians swarm over fuselages of Airbus A320 planes, foot soldiers in the battle to dominate what will become the world's largest aircraft market.

The nearly completed aircraft at the Airbus assembly plant in the northern city of Tianjin, an hour outside Beijing, are resplendent in the livery of their Chinese airline buyers.

Since it opened in 2008, the plant has effectively acted as a showcase for Airbus's wares and given the European manufacturer an advantage as it competes with US arch-rival Boeing to dominate Chinese aircraft sales, Airbus officials said.

Early controversy over technology transfer, the safety of the aircraft assembled at the plant and comparatively lower salaries of Chinese workers appears to be forgotten.

Now negotiations to extend the joint venture beyond its original 10-year shelf life are entering the final stages.

"The Tianjin site is an expensive investment, but you have to have a global vision and look at what it brings us," said Eric Chen, president of Airbus China.

"Since we decided to set up here, our market share in China has gone from 25% to 50%," he told journalists on a visit to the plant, the only Airbus assembly plant outside Europe.

Some 20% of the worldwide production of Airbus already goes to China.

For now, it still lags Boeing in terms of final deliveries in the country, sending 133 aircraft to clients last year – 10 fewer than the US firm.

But its 1,000th Chinese delivery took place on Dec 23, 28 years after the first in 1985. Now it is aiming to achieve its second 1,000 deliveries by 2020.

It is a conservative goal given the boom in Chinese air traffic, Chen said. According to Boeing's projections, the Chinese civil aviation fleet will triple over the next 20 years.

Airbus only started winning large Chinese orders after the memorandum of understanding for the Tianjin plant was agreed in 2005, Chen said.

"This is what has made the difference" in the fight against Boeing, he added.

Around 160 medium-range A320 aircraft have so far been assembled in Tianjin, which now produces four of them a month, and there are plans to adapt it to produce the more fuel-efficient A320neo aircraft in the future.

When it opened it had 133 foreign employees, a figure that now stands at 32.

Will Horton, a senior analyst for CAPA Centre of Aviation in Hong Kong, said it was a mutually beneficial relationship.

"Airbus is growing its share of the Chinese market, and China rightfully sees pride and value in having a local assembly line," he told AFP. "Local final assembly means more of the aircraft's value is kept in China."

On Wednesday, Airbus reported net profit of  €1.5bil (US$2.05bil) for last year, up 22%. The company said it took orders worth €218.7bil with its global order book now worth a record €686.7bil.

Airbus has a 51% share in the joint venture and a consortium of Chinese investors including state-owned aircraft manufacturer AVIC holds 49%. The deal was originally agreed to extend till 2016.

"Discussions are underway to renew and significantly deepen this partnership," French Foreign Minister Laurent Fabius said this week after visiting the plant.

Chen told AFP he was "confident" a deal would be reached in time for signature when Chinese President Xi Jinping visits France in late March. But some aspects were still being negotiated, he said, declining to give details. – AFP