Singapore Air Show

Airbus, Boeing expand Asian partnerships

 - December 4, 2006, 2:37 PM

Airbus and Chinese government and industry officials are considering the case for setting up an assembly line in China for A320 airliners and expect to make their decision by next month. China has long been a supplier of airframe parts and assemblies to both Airbus and Boeing. Shanghai, Tianjin, Xi’an and Zhuhai are reported to be candidate sites for the new factory.

The study was announced by president and chief executive Gustav Humbert as Airbus delivered its first A330-300 to China Eastern Airlines in Shanghai last month. It could lead to China delivering four aircraft a month and relieving pressure on European final assembly as Airbus increases production following last year’s record orders.

The move comes as Boeing looks for more outside suppliers while concentrating in-house resources on design, engineering, and systems integration. Engaging foreign partners also can enhance sales prospects for both manufacturers by offsetting customers’ acquisition costs.

Local A320 assembly would represent a major step for China, which produces various parts and subassemblies for the European production lines. Within 15 years, the country  would like to build large passenger airliners as a follow-on from its current development of the 90-seat ARJ21 regional jet.

Any Euro-Chinese A320 joint venture is likely to be an Airbus-led arrangement that could begin by building the 150 examples ordered late last year, neatly fulfilling Airbus aspirations to increase industrial participation in Chinese aerospace development. The European airframer plans Chinese procurement worth $60 million in 2007 and $120 million annually by 2010.

A joint engineering center set up with China’s Avic group, initially to concentrate on A350 design (in which China has been offered a 5-percent share), is expected to employ 200 Chinese by 2009. Avic engineers also have helped with A318 development.

Last November, Airbus and Avic extended plans for Chinese A320 wingbox production under an agreement with China’s National Development & Reform Commission, which followed earlier contracts for wing subassemblies and cabin floor sections that dated back to 1999. The new agreement includes management of a second-tier supply chain. Currently, five Avic companies produce Airbus parts: Chengdu Aircraft, Shenyang Aircraft, Xi’an Aircraft, Hong Yuan Aviation Forging & Casting, and Hafei Aviation Industry Co. Ltd.

Boeing Ties

Boeing had needed a big order from a major carrier to launch the 787, and found it when All Nippon Airways ordered 50 examples of the new twinjet that will have a composites fuselage. “Does it help that Japanese companies will play a pivotal role in assembling the composite fuselage and the wing?” asked 787 vice-president Mike Bair. “Absolutely, it does. We have close ties with Japanese companies which are real leaders in composites. So sharing the work has brought dual access to technology and to market and it has been a key factor in launching a program.”

With the 787, Boeing is importing a much higher percentage of engineering and design work than previously. “It’s best to have the people building the parts designing the parts,” said Bair. “It’s arrogant to sit in Seattle and guess how to optimize someone’s factory in Japan.” Of course, it helps a lot that Chinese third-party manufacture comes at a fraction of the equivalent domestic cost, but Boeing argues that such outsourcing is about access to the world’s fastest-growing market.

With U.S. materials company Hexcel, Boeing and Avic formed BHA Aero Composite Parts in 1998 to manufacture secondary-structure and interior parts. Two years ago Boeing selected Chinese suppliers for the 747 Special Freighter and the new 787.

Other Asian Markets

Elsewhere in Asia, another important marketplace is India, for which Boeing is to build 68 aircraft for Air India and Air India Express. Under a mandatory minimum 30-percent offset deal, Boeing will establish maintenance, repair and overhaul and pilot training bases.

Boeing has a $1.9 billion aerospace counter-trade agreement with India and is scouting for companies to provide components. One example is New Delhi-based HCL Technologies, which is supplying navigation and data control software for the 787.

But outsourcing brings responsibilities as well as benefits, something Boeing discovered last year when receiving a U.S. government warning about having shared materials technology with Japan in exchange for composites 777 subassemblies. Now Airbus may need to be cautious as it plans A320 assembly in China. Boeing has been there with its plans for Shanghai production of the MD-90T Trunkliner, which came to an end when production closed in 2000 after completion of just two aircraft.