Chinese whispers

Airbus wings may be made in China as a kind of apology for last month’s scrapping of European plans to build a 100-seat airliner with the Chinese, in partnership with Italy and Singapore. A deal could be in the offing soon: Airbus says it will do some kind of industrial deal with China this year. […]

Airbus wings may be made in China as a kind of apology for last month’s scrapping of European plans to build a 100-seat airliner with the Chinese, in partnership with Italy and Singapore.

A deal could be in the offing soon: Airbus says it will do some kind of industrial deal with China this year.

A week after the cancellation of the Chinese AE31X project (see panel), Airbus managing director Noel Forgeard said: ‘We do intend to cooperate closely with China. We have defined with them a new confidential project, to be disclosed later this year.’ He said this would involve technology transfer.

BAe builds all Airbus wings at its Chester and Bristol plants, and has a 20% stake in the consortium.

Establishing a A320 wing plant in China is believed to be the idea of Chris Geoghegan, a strategic adviser to Airbus and a former boss of British Aerospace Airbus. It may be a response to the fact that while Airbus had orders for 1,786 A320-family airliners last month, 926 had yet to be delivered a big backlog. The supposed Chinese line would be additional to the UK capacity.

Airbus has been guarded about details of its ‘confidential’ Chinese project. ‘Nothing has been decided,’ Airbus spokesman David Velupillai said. But he was swift to stress that ‘we remain serious about cooperation. It won’t be on a new aircraft. It will be on an existing aircraft. What exactly it will be remains to be seen.’

This was more cautious than an earlier Airbus statement that joint manufacturing of Airbus aircraft with China was being explored.

Velupillai adds: ‘AVIC and Airbus have been working successfully together for more than 10 years’. The Chinese make emergency exit doors for Airbus in Shenyang and carbon fibre components in Xian. The Huizhou Aviation Industry Group also makes tools and jigs for Airbus.

There could be other good reasons for reaching a deal with the Chinese, who have 112 Airbus airliners in service or on order. China’s airlines are suffering a rough patch because of the Asian financial crisis, but their potential market is impressive in the medium to long term.

But will BAe be happy to transferring production to China? Some observers argue it will jealously guard its strengths in building and designing Airbus wings.

Chris Avery, aerospace analyst at Paribas, says: ‘Don’t hold your breath. I would not anticipate any big change in the parts sourcing arrangements. BAe will not materially dilute its technological position.’

Others argue that the rumour is part of an attempt to influence the value of Airbus before it becomes a single company next year. ‘I think it’s something that’s been floated as part of the valuation of Airbus,’ one City aerospace analyst said. The wing production idea ‘may have arisen in conversations over the future valuation of Airbus, but I’ve no reason to believe there’s anything concrete in it’, he adds.

Velupillai does not know how the European political approvals process would clear any deal with the Chinese, but suggests that any extra production of wings or other big parts would need British, French, German and Spanish government approval.

Earlier this month Prime Minister Tony Blair visited China with UK industrialists, including BAe chairman Sir Dick Evans. They discussed Airbus’s plans with the Chinese and Blair said received ‘a very clear commitment’ from Chinese leaders that orders would be placed for Airbus airliners when China was able to.

Airbus’s plans with the Chinese may be announced at next month’s Zhuhai air show in China. One industry bet is that some limited co-production of A318 parts could be offered. Or there could be a co-production deal for parts of the 50 A320-family airliners which may be bought soon by Chinese regional airlines, in a tipped £1.5bn deal.

Airbus is certain, though, to want to exclude Boeing, which since the AE31X collapse has been offering China its own 717 100-seater, and work on the 717’s wings.