ANALYSIS: Airbus China growth strategy pays off

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Airbus has been aggressive in establishing its presence in China, and this was on show at the Aviation Expo in Beijing on 25-27 September.

The airframer's flags and posters were prominently displayed at the convention centre, and its logo printed on the lanyard of all visitor passes. Advertising aside, Airbus held the first press conference of the show, where chief executive Fabrice Brégier and his team launched the lower-weight A330-300, targeted at the China market. The same day, it also announced agreements for over 40 A320s from two Chinese airlines.

The Aviation Expo is a small show and none of the other aviation players present made any major announcements. Boeing did not hold a press conference.

Such aggression is emblematic of how Airbus has grown its market share in China. Flightglobal's Ascend Online database shows that Chinese carriers operate 954 Airbus and 956 Boeing aircraft respectively. This effectively gives Airbus 50% of the market, it has come a long way from 1995 when it held only 6%.

Of the 954 Airbus jets in China, 85% are A320 family narrowbodies. Airbus believes its decision to set up an A320 final assembly in Tianjin, its first outside Europe, has accelerated its growth in China.

“When we started in 2005, there were questions of whether it would work. After seven years, now we see the strategy really paying off,” Brégier told Flightglobal Pro in an earlier interview, adding that its market share in China has grown to 50% from 30% since it set up shop in Tianjin.

The facility is a 51-49 joint venture between Airbus and a Chinese consortium comprising the Tianjin Free Trade Zone and AVIC. A memorandum of understanding to strengthen industrial cooperation between the Chinese civil aviation industry and the European manufacturer was first signed in Toulouse in 2005. Part of this included the possibility of setting up a final assembly line in China.

Construction of the facility started in 2007 and by June 2009, the first A320 assembled in Tianjin was delivered to Sichuan Airlines. To date, the facility has assembled 141 aircraft.

As it moves to increase sales for the A320neo in China, Airbus China president Eric Chen has said that the Tianjin line will assemble the re-engined variant and could also do work on the larger A321, which it sees an increase in demand for.

Chen says he has secured a firm commitment for at least 100 A320neos from Chinese customers, and that discussions for several hundred more are ongoing. Boeing, meanwhile, is unwilling to disclose its discussions with customers.

Flightglobal Ascend's senior consultant Rob Morris, however, says it is not possible to make an explicit link between Airbus' Tianjin line and its market share in China. With only two OEMs in the sector, it was inevitable that the pie would be roughly split at 50%. Both manufacturers also have Chinese manufacturing for various programmes, which also impacts market share considerations, he adds.

What both airframers understand is that success in China requires a deep involvement in the country. This often means collaborating or setting up joint ventures with Chinese companies. For Airbus, after it delivered the first Airbus, an A310, in 1985 to the predecessor of China Eastern Airlines, contracts for Chinese companies to build sections of Airbus aircraft followed, as did further orders from Chinese airlines.

Chinese companies now produce parts such as passenger doors and inter-spar ribs for Airbus jets and China has also been assigned a 5% workshare on the A350. Besides the final assembly line, it also has a composites factory in Harbin, an engineering centre as well as a training and support centre in Beijing.

Boeing is no different. China builds parts such as horizontal stabilisers, vertical fins and wing panels for Boeing's aircraft, and has workshare on the 787. It also has a composites factory in Tianjin, and is working with AVIC and Comac in various joint ventures to develop technologies such as sustainable aviation biofuels.

The long term repercussions of such deep collaboration with China are unclear, especially as China develops its own range of aircraft. Comac is building the C919 narrowbody to rival the A320 and 737, and is researching a widebody that could compete with the A350 and 787.

"Clearly, there is some risk of technology and skills transfer. Inevitably, in the longer term, there will be some element of this regardless of the protection that is put in place," says Morris.

Boeing China president Marc Allen says the plan is to work with Comac to create technology to make both players more successful, and that as Comac matures, the perfect outcome is for the Chinese airframer to "steal a share from Airbus".

Airbus is also aware that its relationship with Chinese partners will become more challenging, especially since AVIC is a partner in its final assembly line.

"It makes our relationship with Chinese partners more complicated. They used to be customers, partners and in future, they will become a competitor. This is going to be a very delicate situation," concedes Chen.

Flightglobal's Fleet Forecast projects that the C919 will capture some 20% of the market share in the large narrowbody sector in China by 2030. The remaining 80% of the market is expected to be shared equally between Airbus and Boeing, says Morris.