Airbus Extends China Assembly by 10 Years as More Deals Awarded

Airbus Group NV (AIR) deepened its commitment to the Chinese aviation market by agreeing to keep a joint assembly line for narrow-body models running for 10 more years after the country announced an order for 70 aircraft.

China made a commitment for Airbus planes including 27 A330 wide-body airliners held up for more than a year by wrangling over carbon levies. The commitment also included 43 single-aisle aircraft, in an accord announced in Paris today.

China suspended 55 aircraft orders after the European Union sought to unilaterally curb aircraft emissions in 2012, restoring some when the EU weakened its stance while holding back on contracts for 27 A330s.

Besides agreeing to operate the A320 single-aisle assembly line in Tianjin for longer, Airbus and China announced a series of accords, including one to boost the capacity of Chinese air space by developing a state-of-the art air traffic management system. Airbus and relevant Chinese parties are also working on a wide-body aircraft interiors center in China.

"It's not simply about the number of planes sold, it's a real industrial partnership," French President Francois Hollande said after the contract signature, which took place at the presidential palace on the occasion of a visit by Chinese President Xi Jinping.

The aircraft agreement was part of a package of 21 accords and contracts signed today involving Chinese and French companies.

Chinese Assembly

China will supplant the U.S. as Airbus's biggest single market within 20 years, the European company said in its most recent forecast. The Asian nation is already the No. 1 buyer of the twin-engine A330 and is being specifically targeted by Airbus through the development of a new, shorter-range variant.

Airbus has encouraged Chinese orders for single-aisle jets by establishing a factory in Tianjin that assembles four A320s a month. Airbus owns 51 percent of the joint project and China's Avic the rest. The facility began delivering A320 jets in 2009, with the 100th plane handed over in mid 2012.

Even as China and Airbus work together on the single-aisle planes, state-controlled Commercial Aircraft Corp. of China Ltd. aims to have a rival plane with 168 seats in service before the end of this decade, targeted initially at the domestic market.

The company delayed the maiden flight of the plane, called the C919, to 2015 from an earlier plan for 2014.

The largest contract ever placed by China with Airbus was in 2007, when the country's premier announced a $17 billion deal for 160 jetliners. In 2005, the company won a $10 billion deal for 150 aircraft, also announced in Paris.

Source: Bloomberg News by Andrea Rothman | Photo: Reuters 

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