AVIC Restructuring Takes Aim at Boeing, Airbus

 - August 28, 2009, 7:38 AM

Aviation Industry Corp. of China (AVIC) is undergoing another restructuring so that all of its assets are incorporated into a single company listed on the Hong Kong stock exchange. The plan would consolidate some $22 billion worth of aircraft production assets under the mantle of AVIChina as the group attempts to establish a corporate structure to match that of Boeing and Airbus. AVIC, China’s largest civil and military aircraft maker, owns 20 percent of Commercial Aircraft Corp. of China (Comac), which plans to build a new 150-seat jet in time to fly by 2015 and enter service in 2016.

Under its restructuring, most of AVIC’s assets, scattered across 21 listed companies, will fold into AVIChina Industry & Technology, the Hong Kong-listed helicopter and trainer production investment arm, to help eliminate competition among aircraft makers. Li Ping, head of capital operations at AVIC, said that over a five-year period AVIChina will become the holding company for publicly listed AVIC entities engaged in aircraft production. Meanwhile, the group also will acquire non-listed assets directly from the parent company.

“Military assets will be injected into AVIChina since restrictions on the listing of military products have been reduced,” Li said. AVIChina-controlled Jiangxi Hongdu Aviation Industry has already acquired a military trainer production line from AVIC. Hafei Aviation Industry and Jiangxi Changhe Automobile, controlled by AVIChina, maintain a 50-50 joint venture with Airbus parent EADS to develop the Eurocopter 175/Z-15 helicopter.

The Chinese have issued international tenders for parts and components for Comac’s new jet but the government wants local companies controlled by AVIC to win a large proportion of the business. “But this can only be done if Chinese manufacturers improve their competitiveness and outbid foreign rivals,” said Xu Mingle, a Hong Kong-based analyst.

Comac plans to display, for the first time on an international stage, a mockup of the new airplane, dubbed the C919, during this year’s Asian Aerospace show, scheduled to take place in Hong Kong from September 8 to 10.