[nonmember]Bombardier, Cessna, Hawker Beechcraft and Israel Aerospace Industries (IAI) have made the second round of a bidding process to create a joint venture with Aviation Industry Corporation of China (AVIC) Military to assemble business jets in China.
Bombardier, Cessna, Hawker Beechcraft and Israel Aerospace Industries have made the second round of a bidding process to create a joint venture with Aviation Industry Corporation of China (AVIC) Military to assemble business jets in China.
AVIC this week received approval to acquire US general aviation manufacturer Cirrus Aircraft.
The joint venture production plant will be based in Chengdu, the capital of Sichuan province, in the southwest of China. The Chinese company will hold at least 51% of any joint venture.
Dassault and Embraer submitted plans but have dropped out of the process. Gulfstream did not bid.
“Bombardier is the favourite at this stage,” said one competitor involved in the bidding process. “They have lots of people on the ground in China, are well respected and have learnt how to form relationships with Chinese partners which is important.”
The Canadian manufacturer has over 4000 people in China working in its rail and aircraft businesses.
“Bombardier and the Chinese Aviation Industry already have a long history,” said a spokeswoman for Bombardier. “We are in discussions with key leaders from both AVIC and COMAC [Commercial Aircraft Corporation of China] on a number of topics at any given date and time. It is our policy to keep those conversations confidential until such time that all parties are ready for disclosure.”
The Canadian manufacturer started working with Xi’an Aircraft Corporation to provide components for Bombardier’s CL-215 and Bombardier 415 amphibious aircraft in the mid 1980s. Shenyang Aircraft Corporation, a subsidiary of AVIC, has been making doors for Bombardier’s Q-Series turboprop aircraft since the 1990s. Shenyang is also supplying the fuselage, tail cone and doors for its latest commercial aircraft programme the C-Series as a risk sharing partner.
In April 2007, AVIC and Bombardier signed a strategic cooperation agreement to promote the development of commercial aircraft. However, Cessna also has a strong relationship with AVIC. Shenyang Aircraft Corporation is manufacturing partner for the Cessna 162 Skycatcher light sport aircraft.
Hawker Beechcraft second?
The official close to AVIC says that Hawker Beechcraft has also submitted a strong proposal and is competing hard for the joint venture. The company is increasing its staff in China and senior managers have met with AVIC recently.
Gulfstream held initial talks with AVIC but chose not to bid. A Gulfstream spokesman said the company did not wish to comment on any commercial deal.
However, IAI – a partner on Gulfstream’s G100, G150, G200 and G250 programmes – is believed to have submitted an independent proposal.
“IAI have a history of working with different partners so this is not a surprise,” said one Beijing based business jet specialist. A spokesman for IAI said: “IAI’s policy is not to discuss its business matters in the media.”
Embraer and Dassault out?
Sources in China say that Embraer and Dassault are no longer in talks with AVIC.
Embraer already has a joint venture – called HEAI – with a different division of AVIC in Harbin. Whilst it did bid for the new venture, it is unclear how committed it was to a second manufacturing plant 1500 miles away from Harbin. In April 2010 Embraer announced that HEAI was switching from assembling ERJ 145 regional jets to building Legacy 600 and Legacy 650s business aircraft.
Dassault was the first manufacturer to reveal that AVIC was looking for a joint venture partner. In December 2011 Jean Rosanvallon, chief executive Dassault Falcon told French newspaper La Tribune that the French manufacturer was bidding for the right to invest 40% in a joint venture. “There should be a decision in 2011/12. We will then know, yes or no, whether we will collaborate more seriously with them,” Rosanvallon told La Tribune.
Do joint ventures make sense?
Discussions are still at an early stage and the joint venture may not happen even if one manufacturer is selected.
AVIC is a large, disparate organization with many subsidiaries that compete with each other.
A different AVIC subsidiary has developed plans to build an adapted business jet version of China’s Advanced Regional Jet for the 21st Century (ARJ21) and is arguing that the company should focus on a domestic business jet. The GE-powered ARJ21 is designed to seat 78 passengers in airline operations. At the 2011 Paris Airshow, Russia’s Sukhoi and Italy’s Alenia announced a similar plan with their SuperJet.
Whilst few doubt that domestic business jet market will grow eventually, some officials at manufacturers doubt that there is enough local demand to justify a business jet assembly plant in China.
“Since the 1980s we have had manufacturers coming over to work on joint ventures – most famously McDonnell Douglas and it has never worked,” says one Beijing based business jet specialist. “There is no guarantee that this will be successful even if it goes ahead.”