More than eight years after splitting state aerospace giant Aviation Industries of China (AVIC) into two mammoth holding companies, China’s Government is considering combining them again in a move linked in part to the country’s aim to develop large commercial aircraft.

Rumours have been circulating for weeks that the Government may re-combine China Aviation Industry Corp I (AVIC I) and China Aviation Industry Corp II (AVIC II) and state-run media now confirm that discussions are indeed taking place.

The official Xinhua news agency calls the talks “only exploratory” but adds that “a detailed consolidation plan was expected to be unveiled later this year”.

“To enhance the manufacturing capability of the aviation industry, AVIC I and AVIC II will probably undertake consolidation and co-operation,” it quotes an unidentified AVIC I VP as saying.

It adds: “The industrial manoeuvre was intended to concentrate preponderant resources of both companies and prepare the industry for the production of large jets.”

Chinese Government officials have been saying over the past year that the country hopes to eventually be building large aircraft seating at least 150 passengers, putting it into direct competition with Airbus and Boeing.

China’s State Council approved in principle last year the start of research and development of large aircraft and a formal project company is expected to be established in the coming months, part-owned by both AVIC I and AVIC II as well as other state-run companies.

The official media reports say that if a full merger of AVIC I and AVIC II is not considered viable, they may spin off their respective civil manufacturing businesses into a single holding company. Both AVIC I and AVIC II have over the past six months been separating some of their respective subsidiaries’ military and civilian businesses, in part to help them partner with western companies that may not be allowed to do business with Chinese defence firms.

At the time of its split in the middle of 1999, AVIC was an enormous holding company with a combined workforce of more than 500,000. It manufactured a large variety of aerospace and non-aerospace products, such as civil and military aircraft and aero-engines, missiles, automobiles, motorcycles, buses, air conditioning equipment and textile machinery.

As part of the company’s split into two holding companies, AVIC I took over 53 large and medium-sized industrial enterprises, 31 research institutes and 20 other companies, and had more than 280,000 employees. AVIC II, which took over far fewer aviation-related businesses, had 54 industrial enterprises, three research institutes and 22 other companies, with a total workforce of 220,000.

According to state-run media, AVIC I, which is developing the ARJ21 90-seat regional jet which is being prepared for its first flight, now has 240,000 employees and assets of more than 100 billion yuan ($13.7 billion). It is the parent of 47 industrial enterprises and 31 research and development institutes.

Smaller AVIC II, which also still has more than 200,000 employees, is reported to have assets of 31.5 billion yuan. Its civil aircraft work largely is based around general aviation and turboprop passenger aircraft production.

Source:'s sister premium news service Air Transport Intelligence news