Airbus begins push for Chinese market

Airbus broke out of its European fortress yesterday when it opened a $600m (£325m) final assembly line for its best-selling A320 aircraft in China and committed to buy $1bn of locally made components by 2020.

The plant, the most modern of its kind in the world, is designed to establish a foothold in China's booming aviation market, which is growing at 14.5% a year. Airbus executives said it would see orders for more than 3,000 new planes over the next 20 years as China develops the world's second-largest aviation market after the US.

After an opening ceremony attended by premier Wen Jiabao and more reminiscent of a Communist party congress setting, John Leahy, chief operating officer (sales), said China could account for as much as a fifth of the more than 850 orders the European plane-maker expects this year.

Leahy said Airbus, which has 450 planes on order in China, had a provisional agreement to supply a further 280 and he expected the Beijing authorities to approve up to 160 of these by the year's end. The new plant, he added, could mean that Airbus would capture more orders than Boeing.

But he admitted that with western airlines facing takeover or bankruptcy and struggling to find capital for new planes, orders could take a dip in late 2009-10 and there could be cancellations. He insisted that several airlines had already secured funding for their current orders despite the credit crunch.

The Chinese plant marks a new era in the history of Airbus, a 35-year-old European champion of engineering innovation and marketing expertise that has been riven by national rivalries, as it pursues its goal of becoming a global company with an international footprint on five continents.

The plane maker, which has captured half the world market, plans to expand its presence in Morocco, Mexico, India and Russia. It has also targeted the US, where it will assemble refuelling tanker aircraft in Mobile, Alabama, if it wins a re-run Pentagon bidding battle against Boeing.

Its plans, which will see 5% of the airframe of its new wide-body A350 jet produced in China and could see 10% of new-generation planes sourced from the people's republic, has awakened fears among its core British, French, German and Spanish workforces that Airbus is turning its back on Europe.

Unions, which have reluctantly accepted 10,000 job cuts, are worried Airbus will switch more output to low-cost countries in the weaker dollar zone.

Tom Enders, the chief executive, told the Guardian: "We have 95% of our employment and 75% of our procurement in Europe, and politicians and unions would like to keep it that way but it can't.

"Airbus would make a huge mistake if it locked itself into Fortress Europe. The bulk of employment, procurement and all innovation will stay in Europe - and the US."

The British plant at Broughton, Flintshire, will lose its status as the sole supplier of wings for all Airbus planes as Chinese manufacturers will provide the wings for the A320 single-aisle jets made at Tianjin. Airbus said Broughton would retain an innovation cutting-edge in wing design for new planes.

The new plant, employing up to 600, will assemble four A320s a month from 2011 - compared with 40 a month in Hamburg, the model for the Chinese line. Airbus indicated it could eventually produce the A320 replacement, due in the next decade, and Enders did not exclude the possibility that Airbus would cooperate in Chinese plans to build their own aircraft.

"But we are not gate-crashing their project," he said.

[Source: David Gow in Tianjin, The Guardian, London, Uk, 29sep08]

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