Airbus set to launch Tianjin trade hub

 - January 27, 2010, 10:45 AM

The full launch of the new Airbus logistics center in China’s Tianjin Free Trade Zone is due to occur next month. The facility will manage the European manufacturer’s industrial cooperation projects in China, where six companies, in different cities and with individual supply chains, manufacture parts and components for Airbus.
The move increases the collective presence of Airbus and U.S. competitor Boeing in China. The People’s Republic offers the prospect of many hundreds of orders for jetliners needed for what is forecast to become the world’s second largest domestic aviation market.

The two companies have worked hard for many years to establish influence through direct investment, joint ventures or other partnerships, or employment of Chinese manufacturers to make parts. Indeed, for domestic customers, Airbus has opened a Chinese A320 final assembly line, which aims to produce four a month independently from European production requirements.

Airbus China opened Beijing offices in 1990, while Boeing’s first Chinese suppliers date from the mid-1970s.

The U.S. manufacturer claims its “expanding links with Chinese airlines, manufacturing partners and financial institutions [have established] a solid platform,” but it does not view the Asian country as only a market. “We’re looking to broaden and deepen our relationship,” said China operations vice president John Bruns.

A major Airbus milestone was on-time delivery of the 11th A320-series aircraft from Tianjin at the end of last year. The first A320 was delivered in June, five more A320s and five A319s followed, and 25 are expected this year. Production is expected to reach four a month late next year.  

The first Chinese-made A320 wing is to be delivered later this year to Tianjin, where current final-assembly business plans extend until 2016.

Wings are being produced in China to avoid the cost of shipping locally made wing boxes and leading- and trailing edges to Europe for wings returning to Tianjin final assembly.

Airbus and Aviation Industry Corp. of China (Avic) are building a factory in Harbin to make A320 elevator parts, A330 components and composite items for the A350 (5 percent of which will be Chinese). The A318 was the first new Airbus developed with Chinese assistance.

Of about 260 Airbus employees in China, 80 percent are nationals, while Boeing has 150 employees. Annual Airbus procurement from China is expected to reach $120 million this year. As China’s largest single aerospace customer, Boeing has bought $1.5 billion worth of such hardware and services since the 1980s, a figure the company expects to double in the future.

The U.S. manufacturer sees mutual advantage in its Chinese initiatives. “Boeing partnerships in China are strategically chosen for long-term benefits to all,” said Boeing China business development vice president Kenneth Yata. “Our projects help Chinese partners gain technical and manufacturing experience.”

While both Western companies might appear altruistic, they are driven by hard-nosed business considerations. Underlying their respective activities (see box on page 38) is recognition that if they don’t win Chinese orders, someone else will–possibly China’s own developing aerospace industry, which plans a narrowbody. “That’s going to happen,” said Boeing commercial airplanes marketing vice president Randy Tinseth. “We have to find a way in China to both partner and compete.”

Estimating that by 2020 Chinese airline capacity will have to have increased by at least 300 percent, Airbus intends to capture “at least half” of all new orders. Boeing has similar ambitions: “We must be successful in China. There’s no alternative. It’s so important to our future,” concluded a spokesman.