Airbus to open second China assembly line, finalises jet order

BEIJING/PARIS, April 6 (Reuters) – Europe’s Airbus (AIR.PA) moved to double capacity in China and strengthen access to the world’s second-largest aviation market by agreeing on Thursday to build a second Chinese assembly line, as domestic travel returns to pre-pandemic levels.

The world’s largest planemaker, which has overtaken Boeing as a supplier to China amid tensions between Washington and Beijing, also got the go-ahead to deliver 160 jets already sold but failed to win new orders during a French state visit.

“The recovery here is quite impressive. We see very strong momentum,” Airbus Chief Executive Guillaume Faury told reporters during his first visit to China since the COVID-19 crisis.

Airbus says China’s traffic will grow by 5.3% annually over the next two decades, outstripping a global average of 3.6%.

The France-based group has been assembling its best-selling A320-family planes in Tianjin outside the capital since 2008.

The existing line puts together four jets a month from major parts shipped from Europe and complemented by a local supply chain, with plans to reach monthly capacity of six this year.

The new plant will double that and bring to 10 the number of Airbus assembly lines operating or planned worldwide, including four in Germany, two in France and two in the United States.

Apart from a foray into China by a predecessor company in the 1990s, Boeing has pursued a different industrial strategy, with assembly concentrated in two regions of the United States.

Faury said the expansion would boost the European company’s plans to lift output of the single-aisle A320neo to 75 a month in 2026, from 45 at end-2022, and leave some “surge capacity”.

The target has been delayed following havoc in global supply chains, but Airbus says it is pulling together a resilient system. Shares in the planemaker rose more than 1%.

ORDER APPROVALS

A separate framework or “general terms agreement” authorises the delivery to China of 160 aircraft already on Airbus’ books, including 150 single-aisle jets and 10 A350s.

Witnessed by reporters, Faury signed the agreements a day after Macron said Europe must resist reducing trade and diplomatic ties with China following tensions between China and the West.

However, the lack of new business fell short of some expectations after an official in Macron’s office earlier said the trip would not merely consist of repackaging announcements.

Industry sources said Airbus was negotiating new orders on the sidelines of Macron’s trip, but no immediate announcement was expected.

In November, China approved existing deals for 140 Airbus jets during a visit by German Chancellor Olaf Scholz.

Diplomats say the bundling of big-ticket aircraft orders is carefully crafted at such summits, but industry officials said there was no double-counting between the two European visits.

“Part of it is diplomacy; the more is announced for Europe, that is also a way of sending a message to the Americans,” said a person with detailed knowledge of past China jet negotiations.

In the past, China has tended to split jet purchases between Airbus and Boeing but deals with the U.S. planemaker have slowed significantly in recent years amid trade or political tensions.

Plans for an assembly line in China are likely to capture attention in India, a growing economic and strategic rival whose aviation minister last month called on both Airbus and Boeing to set up local jetliner assembly following record plane orders.

Asked about the company’s footprint in India, Faury told Reuters in Beijing that Airbus was already deeply engaged in setting up assembly of the C295 military transporter in India.

Reporting by Michel Rose, Sophie Yu, Tim Hepher; writing GV De Clercq, Tim Hepher; Editing by Tomasz Janowski, Christina Fincher and Barbara Lewis

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