Airbus draws line at giving China its own wide-body jet plant

[TOULOUSE] Airbus Group SE drew a line on how far it's prepared to extend jetliner production into China, saying it won't help competitors develop aircraft, and that the country's wide-body orders don't justify building its most lucrative models there.

No talks have taken place about construction of twin-aisle jets such as the A330 and A350 in China, Fabrice Bregier, who heads Airbus's planemaking arm, said at a briefing in Tianjin ahead of the opening of a completion shop which will put the final touches to new wide-bodies flown in from Europe.

Airbus and Boeing Co have enjoyed a duopoly in the manufacture of large jets since the US company bought McDonnell Douglas in 1997 and the collapse of the Soviet Union saw Russian output fade.

While Airbus opened an assembly plant for its 1980s-vintage A320 single-aisle model in Tianjin in 2008, local partner Aviation Industry Corp of China bolts together imported structures.

COMAC THREAT

Bregier said that planemaker Commercial Aircraft Corp of China is seen as "a very real competitor" to Airbus that could become formidable earlier than the 20 years once envisaged.

Comac is turning to its own wide-body plans, possibly in conjunction with Russia, as its single-aisle C919 nears its first flight.

"We do not cooperate with Comac," Mr Bregier said. "We don't want to cooperate with Comac. We're not producing engines, we're not producing electric equipment, we've no joint venture with Chinese partners to support in the development of a competitor."

Airbus and Boeing face a balancing act as they seek to court a Chinese aviation market that's set to become the biggest in the world within the 20 years by dangling the prospect of manufacturing work, but without agreeing to a degree of technology transfer that might threaten their industry leadership.

Airbus will break ground on the Tianjin completion center, east of Beijing, on Wednesday, adding painting and cabin fit-out work for the A330 to the assembly of four A320s per month. Boeing also plans to open a single-aisle finishing center in the country.

Airbus has won Chinese orders for about 200 A330s, including 75 in 2015 sufficient to support 12 months of production of a plane that entered service in 2004.

Air China and Hainan Airlines Co are also buying the A350 model, which first flew in 2014 and is priced at US$305 million for the mid-size version, and Bregier said other carriers are expected to follow suit.

The executive didn't say how many wide-bodies China would need to order for him to consider investing in a local assembly line. The country has ordered just short 1,000 A320s - yet the planes manufactured in Tianjin will represent only 7 per cent of the 60 per month Airbus aims to produce globally from 2018.

Bregier stressed that Airbus remains enthusiastic about partnerships in China after electing to cooperate "massively" there 10 years ago to counter Boeing's dominance.

A plan for AVIC to supply equipment such as seats and galleys to the Toulouse-based company will reach fruition in three to five years, he said.

BLOOMBERG