Like a giant whale, an Airbus A320 passenger jet sits in a finishing center in the Chinese coastal city of Tianjin, where the European aircraft manufacturer is expanding assembly.
“The front part comes from France, the back from Germany and the wings from China. That is true international cooperation,” said Andreas Ockel, general manager of Airbus’ final assembly division in this city of 14 million.
On Wednesday, Airbus added a new element of international cooperation by breaking ground on its second finishing facility in Tianjin. By the end of 2017, the plant will paint, assemble cabins and deliver wide-body A330 passenger jets in a bid to outcompete rival Boeing in the buoyant Chinese aviation market.
Now the two plane makers each own exactly half of the world’s fastest-growing aircraft market. Fabrice Brégier, Chief executive, Airbus
“We have rapidly caught up. But we want to have more than 50 percent of the market,” said Fabrice Brégier, head of Airbus, who was in Tianjin for a groundbreaking ceremony.
“We are showing that we are close to our customers,” Mr. Brégier said.
In its eternal competition with the U.S. aircraft manufacturer, Airbus can point to some tremendous success in China.
When it entered the market in 1985, Boeing had a virtual monopoly in China. By 2004, however, Airbus had wrangled away a 27-percent share. Now the two plane makers each own exactly half of the world’s fastest-growing aircraft market.
The day before the groundbreaking ceremony, Air China disclosed a $2.9 billion order for a dozen Airbus A330-300s.
Aircraft manufacturers have a unique relationship with Chinese customers. The carriers themselves – whether private or state-owned – do not make purchasing decisions. That responsibility lies with Beijing’s powerful planning agency, the National Development and Reform Commission.
Beijing wants to convince the international competition to transfer as much technology as it can get its hands on.
The commission, together with state-owned China Aviation Supplies Holding Company, makes bulk purchases from Airbus and Boeing and later appropriates these to the carriers.
The government’s critical role gives China’s economic planners special negotiating leverage. Both Airbus and Boeing give generous discounts for bulk orders from China. But more interesting for China is the transfer of knowledge and technology necessary for building its own airline industry.
That has both U.S. and European aircraft makers on guard against rising domestic competition from Commercial Aircraft Corporation of China, or Comac, which Beijing backs as an alternative to the current market duopoly.
In November, Comac rollout out its first mid-range passenger jet, the narrow-body C919. The first test flight is planned for this year, ahead of commercial operation in three years.
Comac has some catching up to do.
“The technological head start is vast,” said Dongsheng Li, deputy managing director of Comac’s Beijing Aeronautical Science and Technology Research Center. It could take 20 years for China to build airplanes with the same level of quality as Boeing and Airbus, estimated Mr. Li.
“Boeing’s and Airbus’ business will then turn upside down – that is certain.”
Mr. Ockel, manager of Airbus’ final assembly unit in Tianjin, believes some technology transfer is inevitable.
“In the end, it’s a give and take.”
Although China’s economy is cooling off, its aviation market is still flying high.
Airbus forecasts a demand for 5,400 new passenger and cargo planes in China between 2015 and 2034, with the People’s Republic rising to 17 percent of global demand and surging ahead of the United States as the industry’s biggest customer.
“And those are still conservative estimates, Brégier said.
But China’s economic planners do not want to cede their market to European and Americans for the next 20 years. In the meantime, Beijing wants to convince the international competition to transfer as much technology as it can get its hands on.
In September, the National Development and Reform Commission scored a big success when Boeing agreed to build a joint 737 aircraft completion center with Comac in China – the American manufacturer’s first finishing facility outside the United States.
Airbus isn’t ready to take that leap.
“We will not build on a cooperation with a direct competitor,” the Airbus chief executive said. Comac needed to be taken seriously, he said, adding that it would not take Chinese aircraft makers 20 years to become direct competition for Airbus.
“We do not cooperate with Comac,” Bregier said. “We’re not producing engines, we’re not producing electric equipment, we’ve no joint venture with Chinese partners to support in the development of a competitor.”
But Airbus’ strategy in China does call for working with some Chinese partners. While there is no direct cooperation with Comac, there is with state-owned aerospace and defense company Aviation Industry Corporation of China. Mr. Brégier even leaves open a backdoor for Comac through its strategy for cooperating in new markets.
As in so many industries before, China is joining the race to build airplanes. Airbus and Boeing will attempt to maintain their technological edge as long as they can – but it remains to be seen how long their lead will last.
Stephan Scheuer is a Handelsblatt corrpespondent in Beijing. To contact the author: [email protected]