Airbus woos China with A380 industrial partnership offer

Airbus is offering an industrial partnership with China on the A380 if Chinese airlines place orders for the world's largest passenger jet, whose future is in doubt unless it wins new customers.

Fabrice Brégier, Airbus's outgoing chief operating officer, will hold early-stage discussions on the subject when he heads to China on Monday as part of a trade mission accompanying French president Emmanuel Macron on his first state visit to the country.

Airbus is also proposing to increase production at its Tianjin final assembly line, where it produces four A320 single-aisle aircraft a month. It could increase the rate to five a month, according to people close to the discussions, which would be factored into the planned global increase from just over 50 currently to 60 a month by next year.

The talks come as the European aircraft manufacturer hopes to clinch a deal to sell some 100 aircraft to state-owned China Aircraft Leasing Group during the visit, according to reports. The order is likely to be a mix of single and twin-aisle planes, with China not expected to order A380s at this stage. The rate increase could also be announced then.

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The moves are part of Airbus's strategy to strengthen its presence in China, where demand for aircraft is expected to outpace western orders significantly in the next decade. Both Boeing and Airbus are increasing their industrial presence in the country in an attempt to woo orders.

Chinese market

China, already the world’s second-biggest aviation market, is expected to overtake the US as the largest by 2024, according to the International Air Transport Association.

Airbus expects passenger traffic in China to grow 6.9 per cent annually over the next 20 years, well above the world average. The aircraft maker forecasts that China will need some 6,500 new passenger jets and freighters by 2036, and the country already represents some 24 per cent of Airbus deliveries.

Eric Chen, Airbus’s China president, said last year that, given expectations for rapid growth in passenger traffic, Chinese airlines could need 60-100 superjumbos in the next five years. However, Airbus has only sold five so far to China Southern, with other carriers seemingly reluctant to commit to an aircraft that carries between 500 and 800 passengers, depending on the configuration.

Airbus urgently needs to find new orders for the A380 to keep the line going, however, as its backlog has run down to fewer than 100 aircraft, many of which are thought by industry analysts to be vulnerable to cancellation. An expected $15 billion order for 36 from Emirates Airline remains the subject of intense negotiation.

China has ambitions to develop its own aerospace industry to take on the global duopoly of Airbus and Boeing. An industrial partnership on the A380 could fit into this strategy by giving Chinese suppliers access to work on the superjumbo through a finishing centre, which installs the cabin equipment and applies the livery.

Tianjin facility

Airbus opened its Tianjin facility in 2008 as part of a joint venture with China’s aerospace and defence group Aviation Industry Corporation. Last year the European group extended the partnership with a finishing and delivery centre for the twin-aisle A330 at Tianjin, its first outside Europe, after Chinese carriers placed a sizeable order for the widebody aircraft.

“The added value of the A330 centre is that we are establishing a strong supplier network for cabin equipment,” said one person close to the discussions. “When we have that, we could imagine that these suppliers could apply to equip the 380 cabin.”

Airbus and its Chinese partner have invested some $600 million in the final assembly line so far and the aircraft maker says the total value of its industrial co-operation with the Chinese aviation industry is expected to double from $500 million in 2015 to $1 billion by 2020.

Boeing opened its first commercial aircraft facility outside the US last year when it opened a Chinese completion centre for the 737 single-aisle aircraft. – Copyright The Financial Times Limited 2018