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Airbus to set up JV in China
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European plane maker Airbus expects to launch a joint venture in China to make aircraft components, as part of its efforts to carve a larger slice of the world's fastest growing aircraft market.

"We are studying the possibility of setting up the venture with AVIC II (China Aviation Industry Corporation II) and expect to finalize the deal as early as August," Laurence Barron, president of Airbus China, said, but declined to elaborate.

Airbus expects to use the joint venture to produce composite material parts for its Airbus A350 model. The company last year agreed to have up to 5 percent of the design and manufacturing work of the model done in China.

AVIC II, one of its partners in the nation, will also join in the program through their existing joint venture.

Airbus, which has also agreed to assemble its smaller A320 models in China, expects such moves will help it gain an edge over rival Boeing. The company yesterday said China will need some 2,800 new passenger aircraft and freighters from 2007 to 2026, with a total market value of $329 billion.

"Our aim is to reach 50 percent (of the market share) in 2011," said John Leahy, chief operating officer, customers, of Airbus. "In the next 20 years, the greatest demand for passenger aircraft will come from China, second only to the US."

Carriers from the mainland currently have 401 Airbus planes in service and have ordered another 470. Airbus now holds 38 percent of China's aircraft market, compared with 7 percent in 1995.

China's passenger traffic is expected to grow fivefold and passenger aircraft will triple to around 4,000 on the mainland, according to the company. Freighter traffic is projected to grow sixfold, creating a demand for 130 new freighters over the next 20 years, compared with 45 in 2007.

China's fast-growing economy and rising income level have triggered a boom for the aviation sector. US plane maker Boeing last year said China will buy 3,400 new planes worth about $340 billion over the next 20 years.

Trying to gain an edge over its competitor, Airbus decided to set up a joint venture in China to assemble its single-aisle model Airbus 320. The company yesterday said China will need more than 1,900 single-aisle craft in the next 20 years.

It's also trying to sell more of its super jumbo A380 in China as it expects carriers to opt for much larger aircraft in the future for flights between mega cities.

China has also launched its own project to tap the booming aircraft market. Last year, a group of homegrown companies, including AVIC II, decided set up a joint venture to build large aircraft with more than 150 seats and weighing more than 100 tons. That venture is expected to deliver its own planes by 2020.

Airbus expects to cooperate with the Chinese industry for the large-aircraft project, said Barron. "But it's a great challenge to cooperate with a direct competitor."

(China Daily April 25, 2008)

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