Friday, October 10, 2008

China: A Boeing, Airbus battleground

Anyone interested in what could result should the European Aeronautic Defence and Space Co. get to build Air Force tankers in Mobile might want to take a look at what's going on in China. At the same time Airbus and its parent, EADS, try to increase their foothold in America, they're taking on Boeing in China. And they're taking the same approach - become a partner, not a competitor.

Take a look at a story in Aviation Week from Oct. 5 when you have some time (story). It's about Airbus opening its final assembly line for the A319 and A320 in Tianjin, a coastal city west of the Korean peninsula. The first Chinese-built A320 is scheduled to roll out of the factory doors in June 2009.

Aviation Week says this activity is geared toward making Airbus a partner rather than an opponent of the expanding Chinese aerospace sector. The activity in China is designed in part to get into the growing Chinese market, in part to gain access to a pool of engineers.

In China, Airbus holds a 51 percent stake in the joint venture, the Airbus Tianjin Final Assembly Co., and the remaining 49 percent is owned by the Tianjin municipality and the China Aviation Industry Corp. (AVIC I and AVIC II), according to Aviation Week.

Airbus is also increasing sourcing in China. It spent $60 million in China last year, but spending will grow to $1 billion in 2020, according to Aviation Week. Airbus also plans to integrate AVIC into the portfolio of A350XWB suppliers.

It's not surprising Airbus and EADS are interested in China. It's a growing market, both as a producer and a buyer, of aerospace products. That's also the motivation for Airbus and EADS in the United States, already the chief producer and buyer of aerospace products. EADS is fairly open about its thinking. As its CEO has said, it's important for EADS to become a "citizen" of the places where it hopes to produce and sell aircraft. The thinking is, by putting a stake in a particular country and creating jobs, it becomes not a foreign company and competitor, but a domestic company and, indeed, a partner.

That kind of thinking is certainly not foreign to Boeing, which has been a player in China's aviation industry for some time (story). Since 1972, Boeing has had relationships with Chinese airlines, aviation industry, civil aviation administration and the government. Boeing was invited to help China develop skills, achieve certification, and join world aviation and supplier networks, according to Boeing.

Boeing says that today China has a role in all of Boeing commercial airplane models - 737, 747, 767, 777 and 787. Chinese workers build horizontal stabilizers, vertical fins, the aft tail section, doors, wing panels, wire harnesses and other parts on the 737; 747 trailing edge wing ribs; and 747-8 ailerons, spoilers and inboard flaps and parts of the horizontal stabilizer. China also builds the rudder, wing-to-body fairing panels, leading edge and panels for the vertical fin, and other composite parts for the 787, according to Boeing.

Boeing and Boeing supplier partners have active supplier contracts with China's aviation industry valued at well over $2.5 billion, according to Boeing. There are more than 5,200 Boeing airplanes flying with parts and assemblies built by China. According to Boeing, its equity investment in China is considerable, and the company says it's the Chinese aviation manufacturing industry's largest foreign customer.

Anyone who doesn't recognize that the aerospace industry is global just simply isn't paying attention. And with the fear that the 2010 U.S. defense budget will take a hit because of the financial bailout, it's pretty clear the aerospace industry - and defense industry as a whole - will have to continue looking for more customers worldwide and less costly locations for manufacturing - like the Gulf Coast.

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