PAUL LEWIS / WASHINGTON DC & NICHOLAS IONIDES / SINGAPORE AVIC I deal would counter Embraer's agreement for co-assembly of ERJ-145

Bombardier has signed a tentative agreement with China Aviation Industry Corporation I (AVIC I) to co-produce the CRJ700/900 large regional jet family in Shanghai, in a counter move to Embraer's joint venture with AVIC II to licence-produce the ERJ-145 family in Harbin.

The rival Brazilian and Canadian manufacturers agree there is a Chinese market over the next 20 years for around 500 aircraft seating up to 100 passengers, although the latter believes the bulk of demand will be for the larger end of the category. Bombardier says it "declined" an approach from AVIC II to undertake final assembly of the 50-seat CRJ200 in China as this "does not fit the strategic needs of the Chinese market". The company adds that it continues to hold talks with Chinese officials, but declines to comment on whether it has signed a co-production memorandum of understanding (MoU) with AVIC I.

Industry sources say Bombardier has signed an MoU and is negotiating a more detailed agreement. The deal provides for final assembly of the General Electric CF34-8-powered 70-seat CRJ700 and 86-seat CRJ900 by Shanghai Aviation Industrial Corporation, which has been without work since the last licence-built Boeing MD-90 in 2000.

There is some sensitivity surrounding the deal, given that AVIC I is tasked with developing the indigenous ARJ21 regional jet, although the CRJ700/900 is being positioned as a gap filler to the 79- to 99-seat Chinese jet, which is not scheduled to enter service before 2006. The CRJ700/900 is being targeted primarily at Chinese CRJ200 customers including Shandong, Shanghai and Yunnan Airlines.

Embraer, under its agreement with AVIC II signed in Beijing on 2 December, will form Harbin Embraer Aircraft Industry and hold a 51% stake. AVIC II subsidiaries Harbin Aircraft Industry (Group) and Hafei Aviation Industry will control the remaining 49%. Equity investment will total $25 million and include a new 24,000m2 (258,300ft2) production facility in Harbin, with up to 220 staff.

The first locally assembled ERJ-145 is to be delivered to an undetermined customer in December 2003. "It will be an assembly line for the first units, but will move progressively to full industrial production in about two years," says Embraer chief executive Mauricio Botelho.

The plant will initially produce one Rolls-Royce AE3007-powered ERJ-145 a month but "there is room to expand. We are prepared to react to firm market requirements very quickly," adds Botelho.

R-R says it will open detailed discussions with Chinese industry on placing more aeroengine production work in the country, but is "still debating" what form the engine work will take.

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Source: Flight International