The Tianjin facility has produced an A320—the first Airbus aircraft to be assembled outside Europe—signalling BEIJING’S AMBITIONS TO TAKE ON THE GIANTS of the global aviation industry

History was made on May 18, when the first Airbus A320 aircraft assembled outside Europe successfully completed its maiden test flight at the Tianjin Binhai International Airport in China. The event came amid fears of large scale layoffs by the company in the wake of cancellation of orders, reducing its backlog of 3,600 aircraft substantially. Despite assurances about job security, the impact of recession has compelled Airbus to cut production from 36 to 34 aircraft per month. With only around 30 confirmed orders for A320 so far in the current year, deferred deliveries of the A380 and a dull business jet market, prospects for the French civil aviation industry for 2009 appear least inspiring.

The A320 facility at Tianjin near Beijing is a collaborative effort between Airbus and China Aviation Industry Corporation, the largest manufacturer of aircraft in China, in which the former holds 51 per cent stake. The facility took just under eight months to assemble the first A320 from largely imported components. However, the facility will progressively build up the capability of manufacturing two A320 aircraft per month by December 2009 and hopes to double production capacity in two years time.

Driven by a rapidly growing economy and rising levels of prosperity over the last decade and a half, China is now emerging as the second largest aviation market in the world next only to the US. Airbus already has orders in excess of 700 aircraft from airlines in China. The prevailing global economic turmoil would undoubtedly adversely impact the growth of the aviation sector in China as everywhere else in the world, but the slowdown may only be temporary. With the revival of the global economy, passenger and cargo traffic are expected to grow fairly rapidly and estimates are that the country would have a potential market to absorb on an average around 150 airliners every year over the next two decades—during which period, Airbus hopes to sell as many as 180 A380 Super Jumbos and 130 cargo planes to China. The total outlay for all types of airliners sold in China is estimated to be in the region of $350 billion (Rs 16,55,250 crore).

Not surprising, therefore, that attention of the two giant OEMs must turn to the enormous potential of the Chinese market, drawing them into a fierce rivalry to capture market share. The decision to establish a facility to assemble the A320 family of aircraft in China at a relatively lower cost primarily for the huge domestic and possibly the regional market is undoubtedly a smart move by Airbus. Designed to at least partially neutralise the adverse effects of the sluggish demand in the US and Europe, it is also an audacious manoeuvre to wrench market share from its rival Boeing that has been the dominant player on the scene for a long time. In 1995, Airbus was struggling to retain a foothold with a market share of a miniscule 7 per cent. Aggressive approach, coupled with ingenious foresight, has ensured that its market share today stands at approximately 40 per cent. In four years time, Airbus hopes to raise this figure to 50 per cent. Dialogue between the partners is in progress to establish another plant to assemble the A350 XWB. A deal has also been signed by China with Bombardier to manufacture the centre-fuselage of the new Bombardier C-Series aircraft.

While the China-assembled Airbus aircraft will have a distinct competitive edge both in respect of quality and price, the Chinese agenda goes well beyond mere joint ventures. To start with, the experience and expertise acquired through such collaborative efforts would be used by Beijing as a launch pad to graduate to higher levels within the country’s indigenous aviation industry prior to subsequently making forays into the global arena. A distinct step in this direction is the establishment of a new company, the Commercial Aircraft Corporation of China, to develop new 150 seat and 100-tonne capacity airliners that will ultimately compete, in perhaps five years time, with the global giants. The irony is hard to miss. Should such a scenario come to pass, Airbus and Boeing, however galling, would have to compete with the very entity with whom they are at present collaborating. China already has the experience of building MD-80s under licence and has successfully designed and developed the ARJ21, a twinengine, 70 to 100-seat regional jet.