China signs deal to extend domestic production of Airbus A320 for 10 years

Beijing okays A320 venture for 10 more years and U$6 billion orders for A330 aircraft

PUBLISHED : Thursday, 27 March, 2014, 10:58am
UPDATED : Friday, 28 March, 2014, 12:35am

China signed a new 10-year agreement allowing Airbus to assemble A320 planes on its soil until 2025 and unblocked orders for larger jets worth more than US$6 billion, restoring ties after a row with Europe over aircraft emissions.

Watched by visiting President Xi Jinping and his French counterpart Francois Hollande on Wednesday, Chinese officials in Paris also signed deals to co-produce 1,000 French EC-175 helicopters over 20 years with Airbus' helicopter division and to co-operate on turbo-prop engines with France's Safran.

The A330 orders that got the go-ahead had been suspended during a trade row triggered by China's opposition to a European Union scheme forcing airlines to join an emissions mechanism that Beijing feared could harm its carriers.

Airbus said China had agreed to buy 70 aircraft, including 43 A320 planes and had gone ahead with previously frozen orders for 27 A330 aircraft - deals worth a combined US$10.2 billion at list prices.

But it failed to make headway in efforts to expand sales of its most popular wide-bodied aircraft by offering a new version of the A330 specially tailored for China's domestic market. Airbus is prepared to open a second industrial plant for this project.

Airbus opened its first non-European aircraft assembly plant in Tianjin in 2009 and has been negotiating for months to extend the production venture beyond 2016.

The factory and land are able to increase capacity to eight aircraft a month and could play a major role as Airbus and its US rival Boeing increase production to keep up with demand.

For the time being, production will remain at four a month, Airbus head Fabrice Bregier said.

China is the world's fastest-growing aviation market despite a slowdown in economic growth, with a surge in outbound travellers fuelling the expansion.

But deals announced during the French phase of Xi's first presidential visit to Europe fell short of expectations that China would back the new regional model of A330 and sign 150 jet orders worth as much as US$20 billion.

"The extension of the Tianjin agreement secures production of 1,000 A320 aircraft over 10 years, and these will be the subject of future orders," Bregier said.

He reiterated there was a potential market for 200 of the new regional types of A330. Industry sources say Airbus has been locked in a battle with Boeing for that slice of the busy domestic market.

Bregier said Airbus hoped to make progress within a year on discussions over a possible cabin completion centre for the A330 that was expected to be located in Tianjin, alongside the A320 assembly plant.