Air­bus taps into grow­ing air­craft de­mand from China’s air­lines

China Daily (Hong Kong) - - Q&A WITH CEO -

Avi­a­tion gi­ant Air­bus SE has won or­ders from China to sup­ply 140 sin­gle-aisle and wide-body jets worth $22 bil­lion.

The Euro­pean air­craft man­u­fac­turer also con­firmed that it is in talks to sell more A380 su­per­jum­bos to the sec­ond big­gest econ­omy in the world.

The group out­lined the deal, which in­cludes 100 A320-se­ries jets split be­tween cur­rent and new-en­gine-op­tion ver­sions.

It will also sell 40 of its lat­est twin-aisle A350s, Air­bus Chief Ex­ec­u­tive Of­fi­cer Tom En­ders said in Ber­lin on Wed­nes­day.

The agree­ment was signed with State-owned China Avi­a­tion Sup­plies Hold­ing Co, which will al­lo­cate the air­craft to in­di­vid­ual air­lines dur­ing the next five to six years.

“China is one of the world’s most im­por­tant mar­kets for avi­a­tion today,” En­ders said.

Talks are also un­der­way re­gard­ing a deal for more A380s to add to the five sold to China South­ern Air­lines Co.

“We see de­mand for as many as 100 su­per­jum­bos in the re­gion,” the com­pany said in a state­ment.

China is ex­pected to over­take the United States as the world’s big­gest avi­a­tion mar­ket by around 2024. Air­bus’ ri­val Boe­ing Co has pre­dicted the coun­try will need 6,810 air­craft by 2035, mak­ing it the world’s big­gest sin­gle-coun­try mar­ket worth over $1 tril­lion.

Travel de­mand within China is ex­pected to grow 6.1 per­cent an­nu­ally dur­ing the next two decades, ac­cord­ing to the US plane­maker.

Air­bus al­ready has a nar­row-body pro­duc­tion line in Tian­jin, east of Bei­jing, and out­put of the A320s will be split be­tween that site and Europe, ac­cord­ing to En­ders.

“The com­pany is also look­ing at ex­pand­ing a Chi­nese com­ple­tion op­er­a­tion for its ex­ist­ing A330 model to in­clude the new re-en­gined A330­neo, as well as the A350,” he said.

China’s travel mar­ket grew al­most 11 per­cent last year, three times that in the US.

De­mand for seats has by and large kept pace with ca­pac­ity ad­di­tion. That has at­tracted in­vest­ment from their ri­vals in the US to tap growth.

Amer­i­can Air­lines Group Inc agreed to buy a 2.68 per­cent stake in China South­ern ear­lier this year and Delta Air Lines Inc ac­quired a mi­nor­ity stake in China Eastern Air­lines Corp in 2015. En­ders an­nounced the air­craft sales at Air­bus’ Ber­lin of­fices af­ter leav­ing the nearby Ger­man Chan­cel­lory, where Chan­cel­lor An­gela Merkel separately de­tailed new ac­cords with China.

En­ders said that while the order back­log for the A380 is “melt­ing” fol­low­ing a sales blank in 2016 and in the first six months of this year, the com­pany is “not pan­ick­ing yet”. He pointed out that cost sav­ings will al­low it to break even on a per-plane ba­sis at a pro­duc­tion rate of just one su­per­jumbo a month.

Although the dou­ble-decker is prov­ing tough to mar­ket, there are still sales leads, with China pre­sent­ing re­al­is­tic order prospects.

“I don’t think it im­pos­si­ble that we will have some suc­cess there in the com­ing years,” En­ders said. “We are in talks.”

A pro­posed re­struc­tur­ing at Air­bus should help as he plans to take con­trol of sales and mar­ket­ing for the com­pany’s plane­mak­ing di­vi­sion.

The move will di­lute the roles of chief op­er­at­ing of­fi­cer bil­lion and com­mer­cial-air­craft pres­i­dent, po­si­tions held by Fabrice Bregier. The changes, de­tailed in a let­ter to staff and ob­tained by Bloomberg, comes af­ter Air­bus im­ple­mented a shift to a sin­gle cor­po­rate struc­ture.

That should make the com­pany “less bu­reau­cratic for speed­ier de­ci­sion-mak­ing and ex­e­cu­tion,” En­ders wrote.

Bregier will fo­cus on pro­gram devel­op­ment and steer­ing Air­bus through its biggestever ramp-up of jet­liner pro­duc­tion, En­ders said in the note to the group’s 134,000 em­ploy­ees last week.

As COO, Bregier will also have over­sight of a wider port­fo­lio that in­cludes he­li­copters, mis­siles, satel­lites and de­fense elec­tron­ics, and will lead a group-wide dig­i­tal­iza­tion ini­tia­tive known as Quan­tum.

“How­ever, due to the heavy op­er­a­tional chal­lenges in our largest rev­enue-driv­ing busi­ness, and to slightly re­bal­ance our in­ter­nal bur­den-shar­ing, I will lead sales and mar­ket­ing,” En­ders said.

Air­bus has un­der­gone a se­ries of man­age­rial and struc­tural changes as the air­craft in­dus­try en­ters a pe­riod of slower sales and ramps up to de­liver a record back­log of com­mer­cial air­craft.

A hand­book that dic­tates a “sin­gle Air­bus code” will be fi­nal­ized this sum­mer and dis­trib­uted in Septem­ber.

It will de­tail changes to the ex­ist­ing gov­er­nance struc­ture and the air­craft man­u­fac­turer’s cor­po­rate cul­ture.

Part of the mo­ti­va­tion for the changes is a new em­pha­sis on the ap­pli­ca­tion of big data and new dig­i­tal tech­nolo­gies that En­ders has stressed will be key to the com­pany’s fu­ture growth.

“Our em­pha­sis on in­no­va­tion is now stronger and more am­bi­tious than ever,” En­ders said in the note.

“Teams are fo­cused on lever­ag­ing the new tech­nolo­gies that will re­shape the fu­ture of aero­space just as surely as the jet en­gine once did,” he went on to say in the note.

value of 140 sin­gle-aisle and wide-body jets that Air­bus will sell to China

BLOOMBERG

BLOOMBERG

Tom En­ders, chief ex­ec­u­tive of­fi­cer of Air­bus SE.

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