China Cracks the Aircraft Market
by: Jack Perkowski December 05, 2008
2008 has been quite a year for the country’s aviation industry. Over the past six months, China has created a giant new aircraft company to make jumbo jetliners in competition with Boeing (BA) and Airbus; it has merged the country’s two largest aircraft makers into one company; it successfully tested its first domestic commercial jetliner; and it announced orders for the new aircraft from a unit of General Electric (GE).
In May, China formed China Commercial Aircraft Co. (CCAC) to make jumbo jetliners, capitalizing the new company with registered capital of 19 billion yuan ($2.7 billion). The state-owned Assets Supervision and Administration Commission alone invested 6 billion yuan, becoming the largest shareholder. Shareholders of the new company also include China Aviation Industry Corporation I (AVIC I) and China Aviation Industry Corporation II (AVIC II), two of China’s main state-owned aircraft makers.
In June, China announced the merger of AVIC I and AVIC II into a new company, Aviation Industry Corporation of China (AVIC). The new company, which formally started operations on Nov 8, has 10 major business segments, covering general-purpose aircraft, helicopters, transport aircraft and engines. AVIC has dozens of subsidiaries involved in its various business lines, 21 of which are listed. In 2007, AVIC I reported revenues of over 100 billion yuan ($14.7 billion), while AVIC II’s sales were approximately 10 billion yuan ($1.5 billion). In a recent announcement, an official of the company said that AVIC is targeting revenues of one trillion yuan ($146 billion) by 2017.
In November, China announced that it had successfully tested its first entirely domestic-made jet aircraft. The ARJ21, which stands for Advanced Regional Jet for the 21st Century, is designed to carry between 70 to 80 passengers on short-haul flights.
Also in November, CCAC announced the sale of five ARJ21 planes to General Electric for delivery in 2013. The aircraft leasing arm of General Electric also signed an option to buy an additional 20 planes, in a deal that could be worth $735 million.
