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Chinese Year of the Joint Venture
Joint ventures between Western aerospace companies and their Chinese counterparts and the government are proliferating as partners try to secure assistance in customizing and marketing products in China and the Chinese seek technology transfer.
Partners are working to develop everything from manufacturing aircraft to supplying systems for a new regional jet being developed by China to the latest commercial off-the-shelf air traffic control systems. In many respects, this equipment in Eastern China is more modern than what the FAA is using in the U.S., where the ATC infrastructure is aging and wearing out. U.S. and European avionics companies also have their eye on partnerships in China.
Rob Gillette, who has spent some of his time in China during his first half year as president and CEO of Honeywell Aerospace, says his company needs to take a different approach to selling products and services there. In May, Gillette said that rather than selling individual product lines separately in China, Honeywell needs to package those different lines to make it easier for Chinese customers to interact with the company.
In China, personal contacts are critical along with government approval and a flexible approach that can handle frequent program changes, according to some European aerospace executives based in Beijing. And business is booming. Bob Johnson, Honeywell Aerospace chairman, said in May that there is a revolution going on in China. Only a small percentage of the population has ever traveled by air, but now that the rising economy is increasing affluence, low-cost carriers are fostering a new crop of travelers, boosting commercial aviation.
The Air Traffic Management Bureau of the Civil Aviation Administration of China told this reporter in Beijing last month that the number of flights operating in Eastern China is growing at an astounding rate of 30% per year, dwarfing the growth rates elsewhere in the world. In Western China, the rate is just 15% to 20%, but that is also pretty spectacular. One airport, for example, went from 60 daily flights to 150 in the past three years. ATC specialists caution, however, that the growth rate is predicated on a low level of traffic by Western standards.
While no estimates are available for the boost in traffic that the 2008 Olympics in Beijing might generate, it should be noted that Sydney International Airport recorded nine of its 10 busiest days on record during the 2000 Olympics.
Thales ATM and its Australian affiliate are currently creating three new ATC centers for the three Eastern flight information regions that handle 60% of China’s air traffic. The Thales Eurocat X ATC system went operational last year in Beijing and last month in Shanghai. The center in Guangzhou goes operational later this year. In a single room at the new Beijing Center, controllers on two rows of consoles handle all the arriving and departing traffic from Beijing International, plus en route traffic in the Beijing flight information region. The user-friendly computer system relies on Windows techniques.
And true to the trend in China, Thales ATM is now in discussions with the ATMB about the possibility of starting a joint venture with the Technology Equipment Development Co., an ATMB affiliated company in Beijing. Bi Xinan, the ATMB program manager for the three new Thales ATC centers, says the aim is to have software programming and training capabilities transferred to China while also training Chinese technicians. Thales’ U.S. competitors for ATC business, Raytheon and Lockheed Martin, are also doing business in China.
ARINC’s Asia Pacific division announced plans on June 13 to set up a joint venture with China’s Aviation Data Communication Corp. to develop new products and services for the aviation market. This cooperation will focus on airline communications and airport information technology infrastructure. Bi says there are currently 160 airports in China and plans are in the works to build 50 more in the next 10 years. He also says China will probably include as many as three new ATC centers in its next five-year plan starting next year.
In April, Airbus and China Aviation Industry Corp. II (AVIC II) agreed to set up a joint venture engineering center in Beijing to perform aircraft-specific design work for the Airbus A350, with 200 engineers to be recruited by 2008.
Meanwhile, AVIC 1 Commercial Aircraft Co. Ltd. of China is already developing the ARJ21 regional jet, which it hopes will win FAA certification by the end of 2007. The aircraft is to be powered by the GE CF34-10A; GE has said they see a potential for 500 aircraft over 20 years with a potential value for GE of $3 billion in business. Feeder traffic is expected to grow 12% per year for the next two decades, according to GE. The aircraft will be equipped with Rockwell Collins Pro Line 21 avionics.
And Embraer has partnered with Harbin Aircraft Industry Co. Ltd. to produce Embraer aircraft in China. Harbin Embraer Aircraft Industry Co. delivered the first of these aircraft, EMB 145s, to China Southern Airlines a year ago. The joint venture is set up to employ 220 people at Harbin, the capital of Heilongjiang province.
And while aerospace companies are not in the business of erecting high-rise buildings, they notice the feverish construction under way in Beijing and other big Chinese cities. It seems to be a key indicator that China is now home to half of the world’s high-rise cranes, notes Gillette. —David Hughes from Beijing
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