Article Posted on : - Sep 30, 2008

LONDON (BNS): European aviation giant Airbus has stepped out of its home ground and into unchartered territory. Its first manufacturing unit outside its comfort zone in Europe has come up in China.

The Chinese Premier Wen Jiabao, together with the Party's Secretary of Tianjin Zhang Gaoli and Airbus President and CEO Tom Enders inaugurated the Airbus A320 Family Final Assembly Line (FALC) in Tianjin at a grand ceremony with over 600 guests on September 28.

The final assembly line is a joint venture between Airbus and a Chinese consortium comprising Tianjin Free Trade Zone (TJFTZ) and China Aviation Industry Corporation (AVIC).

"The Tianjin final assembly line for Airbus A320 Family aircraft has been set as a paradigm of Sino-European friendship and cooperation. Based on mutual trust and close-knit cooperation, the two parties have commenced the final assembly of the first aircraft within only one year and three months from the beginning of the facility construction till present and created a miracle in the history of this giant project," said Huang Xingguo, mayor of Tianjin.

"The opening of the FALC is an historic event for Airbus and for the aviation industry," said Tom Enders, President and CEO of Airbus. "The first Airbus final assembly line outside Europe highlights the importance we attach to growing our partnership with China, one of the most important aviation markets today and certainly tomorrow."

The new unit in China that has been set up at a cost of $600 million would provide components for popular A320 aircraft. Airbus would ensure it would buy locally made components worth a billion dollars by 2020.

According to the company's estimate, its order book would be full meeting demands from China. It hopes that more than 3,000 new planes would be required in China in the next 20 years to sustain a high growth rate.

At present, Airbus has orders for 850 A320s. The Chinese facility is expected to meet a large chunk of this demand. Out of these, 450 planes have been ordered in China alone. Airbus hopes its presence in China would make it score over its rival Boeing in getting more orders from the Communist country.

The new facility in China does not mean the company's problems are over, as aircraft orders have been coming down all over the world. Several airlines are deferring their deliveries due to problems in the aviation sector. Companies do not have the capital or projected growth to buy new aircraft, and the steady drop in fliers is only adding to the troubles.

The Chinese plant at Tianjin marks a new beginning for Airbus which has done well in other growing markets of India, Russia and Mexico. It is also expecting to partially build its new A350 model at the Chinese facility.

The move to shift a base to China has already caused workers in Europe to react, as they tend to lose a large number of jobs. But the company’s move out of Europe makes good business sense given the cheap labour and savings in overall production cost.

According to reports, the new plant will produce four A320s every month after 2011. A similar facility in Europe produces 40 aircraft per month. Airbus is also planning to come out with a replacement of A320.

The move by Airbus would make its rival Boeing to draw up an aggressive strategy to counter it. China's aviation market is currently growing at the rate of 14 per cent plus, and is set to emerge as the world’s second largest aviation sector after that of the US. Despite a slowdown in the global aviation industry, China will continue to fuel growth due to sheer size of its economy. Experts feel that the move has given Airbus a head start and others would have to follow sooner if not later.