Airbus, Chinese grow cozier

Airbus received a mammoth order for 150 single-aisle jets from China on Monday that narrowed Boeing's lead in what promises to be a record year for both companies.

The European plane maker also said it plans to enhance its supplier relationships with China, a move Airbus clearly hopes will give it a long-term edge over Boeing in the world's fastest-growing aviation market.

Airbus said it has offered China a 5 percent share of work on the airframe of the A350, its newest jet, and is considering building an assembly line for single-aisle planes in China.

Building aircraft outside Europe would be a first for Airbus, which assembles its planes in France and Germany.

"We are very pleased to enter into discussions about possible next steps of cooperation with our Chinese industrial partners," said Airbus Chief Executive Gustav Humbert.

McDonnell Douglas, before its 1997 merger with Boeing, established a program to assemble MD-80s in China in 1985. The program was canceled after it produced only 35 airplanes in 10 years due to high costs and technical difficulties.

Boeing doesn't assemble any aircraft outside the U.S.

The order for 150 A320-family jets, worth close to $10 billion at list prices, and the pledge of industrial cooperation were announced during a visit by Chinese Premier Wen Jiabao to Airbus headquarters in Toulouse, France.

"We look forward to an even closer relationship with Airbus," said Li Hai, president of the China Aviation Supplies Import and Export Group, the state agency that officially placed the order.

Outside the U.S., no airplane market is more important to Boeing and Airbus than China.

In its latest long-term forecast, Boeing predicted China will buy more than 2,600 airplanes worth roughly $213 billion during the next 20 years as demand for air travel soars.

Joel Johnson, executive director, international for the Teal Group, a Virginia-based aviation-consulting firm, said Boeing should not be too concerned about Monday's announcement, because it is not a binding agreement and many nettlesome details would have to be worked out before Airbus built planes in China.

"When it comes to the fine print, the Chinese are not easy to do business with," Johnson said.

Boeing has been purchasing parts from China much longer than Airbus, and it has recently increased the complexity and quantity of work done by Chinese suppliers.

Chinese-owned factories will build several key parts of the 787 Dreamliner, including the rudder, wing-to-body faring and vertical fin leading edge.

The Chinese are anxious to expand their expertise building airplane components.

Johnson believes they will continue to seek increasingly complex work packages from both Boeing and Airbus.

"I suspect over time they will maintain kind of an even split to keep their options open and to squeeze both sides" on price when ordering planes, Johnson said.

China also likes to use airplane purchases to send political messages, and buying planes from both rival manufacturers gives it diplomatic tools to use while negotiating with the U.S. and Europe on issues.

When President Bush visited Beijing last month, China announced it had finalized agreements to purchase 70 single-aisle 737s from Boeing.

The deals included previously announced orders for 45 planes.

Nevertheless, the signing allowed President Bush to trumpet the benefits of closer economic ties with China, and it gave China ammunition to counter criticism of its ever-burgeoning trade deficit with the U.S.

By placing a much larger order for single-aisle jets this week with Airbus, China likely is expressing gratitude for its closer political ties with the European Union (EU) in recent years, said Peter Chang, managing director of China Aviation Marketing, a consulting firm in Redmond.

China also dearly wants the EU to lift its arms embargo against the country, and Chang said the order could be a means of encouraging that, despite strong political opposition from the U.S.

"They are elephants that are very singularly focused" when it comes to the arms embargo, Chang said.

The EU has also worked hard to promote its own aerospace manufacturers in China, U.S. industry sources said.

At the end of June in Beijing, the EU conducted a three-day EU-China Aviation Summit that featured presentations from companies capable of supplying everything from planes to air traffic control systems and lights for new airports.

No U.S. companies were allowed to take part.

The Chinese government traditionally buys planes in bulk, then doles them out to individual Chinese airlines.

The 150 Airbus single-aisle jets ordered Monday will be distributed among six carriers: China Southern, Air China, China Eastern, Sichuan Airlines, Shenzen Airlines and Hainan Airlines.

David Bowermaster: 206-464-2724 or dbowermaster@seattletimes.com