China Aviation Industry Corporation I (Avic I), which last year elevated
China into the world's fourth country to develop its own advanced fighter
aircraft - the "Jian 10" - is considering consolidation with another domestic
large jet maker.
The discussion between Beijing-based Avic I and China Aviation Industry
Corporation II (Avic II) might lead to the re-merging of the two state-owned
enterprises spun off in 1999 from the former Aviation Industries of China.
But discussion on merger was only "exploratory". A detailed consolidation
plan was expected to be unveiled later this year, the Shanghai Securities News
reported yesterday, quoting "unidentified well-informed sources" with Avic I.
"To enhance the manufacturing capability of the aviation industry, Avic I and
Avic II will probably undertake consolidation and cooperation," a vice president
of Avic I was quoted as saying, being the first head-on response to the rumors
of merger concerning the two aviation producers.
The industrial maneuver was intended to concentrate preponderant resources of
both companies and prepare the industry for the production of large jets, said
the newspaper run by the Xinhua News Agency.
China's State Council, the Cabinet, approved in principle last February the
start of research and development of large aircraft, an air-freighter with a
take-off weight of more than 100 tonnes or an airliner with more than 150 seats,
as well as the establishment of a jumbo passenger aircraft shareholding company.
Just before the New Year holiday, Chinese Premier Wen Jiabao paid a special
visit to the Avic I Xi'an Aircraft Industry (Group) Company to give a pep-talk
on the manufacturing of large aircraft.
During his talks with technicians, Wen emphasized a China-made large aircraft
was a "significant strategy" for the country, which would lift China's
competence in the global market as a slew of technical breakthroughs especially
in engine, materials and electronic equipment to be made.
Currently, only the United States, Russia, France, Germany, Britain and Spain
have the ability to build large aircraft, with Boeing and Airbus taking the
lion's share of the international market.
There is no official timetable for the set-up of the new large passenger
aircraft company, but Shanghai-based China Business News revealed on Tuesday
that March would be the earliest possible date.
Both Avic I and Avic II, together with domestic airlines and
government-controlled investment companies, would likely be the shareholders of
the large passenger aircraft company, it said.
The new start-up would only be responsible for the design and assembly of
large aircraft while production of components and parts would still be left to
other aviation enterprises, the Shanghai Security News reported, quoting a
former expert with the Ministry of Science and Technology.
Being the leading aviation makers, both Avic I and Avic II have expressly
shown their interests in large jets.
"There are no rivals but only partners when it comes to jumbo jet
manufacturing," general manager of Avic I Lin Zongming has said.
Given that the Avic I has taken over the larger and better slice of assets
from the former Aviation industries of China, industry analysts say Avic II
might give up its civil aviation outfits such as airborne equipment production
to Avic I so as to beef up the manufacturing capacity of the latter.
Another market guess is to take out the civil aviation business from both
companies which also engage in military product manufacturing to establish a
third company solely dealing with aircraft for civilian use.
With 240,000 employees and aggregate assets of more than 100 billion yuan,
Avic I is the parent of 47 industrial enterprises, 31 research and development
institutes, provides 90 percent of the aviation weaponry systems of the People's
Liberation Army and has produced over 15,000 aircraft in 20 projects, 50,000
aero-engines and more than 10,000 missiles, according to company statistics.
The maiden flight of ARJII1, China's first 90-seat regional jet with Avic I
holding the intellectual property right, widely viewed as a step closer to large
aircraft, is scheduled for this year.
The smaller Avic II boasts a total asset of 31.5 billion yuan, with its aero
production covering a wide rang of military and civilian vehicles including
helicopters, trainers, general aircraft, unmanned aerial vehicles, engines and
airborne equipment.