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China is idling on runway to build jumbo planes fleet.

When news spread earlier this year that China was setting up a company to develop and build large commercial jets, it really wasn't much breaking news at all. At least not to Boeing CEO James McNerney.

For more than a year, McNerney has been warning Wall Street analysts that China was readying itself to build a fleet of jumbo planes.


That prediction finally came true when China formally announced it would restructure its two state aircraft makers, Avic I and Avic II, primarily so they could pool resources to build large aircraft.

China has long associated the ability to produce a large jet with true superpower status. Just before the New Year holiday, Chinese Premier Wen Jiabao visited the Avic I Xi'am Aircraft Industry Co. to give a pep talk on manufacturing jumbo jets.

During his talk with technicians, Wen emphasized a China-made jumbo aircraft as a "significant strategy" of the country.

Early reports suggest the civilian jets would be a twin-aisle, twinjet, 200-300 seat CS2000 and a single-aisle, 150-200 seat CS2010. Eventually, a military-use jumbo jet would likely follow.

Avic I and II will be reworked to produce parts and equipment for the jumbo jet program in addition to continuing their own product lines.

One of the most intriguing elements to the plot line is why China would delve into large aircrafts when the global market is well-served by Boeing and Europe's Airbus.

"If you assume that the Chinese produced a successful airplane, the challenge for them outside China is to have a solid supports parts system in place," says Scott Hamilton, an aviation industry consultant. "Since they've never competed on a worldwide market like that, it's a huge challenge."

China may attempt to use its emerging network of smaller scale customers in Africa, Southeast Asia, and Latin America as a market for uncompetitive Chinese products.

Currently, only the United States, Russia, France, Germany, England, and Spain have the capability to build jumbo aircraft, with Boeing and Airbus taking the lion's share of sales on the international market.

China's aviation demands ascended with the country's rapid rise in economic power. According to Airbus, the Chinese domestic market is expected to increase fivefold by 2026, making it the second largest civil aviation market after the United States.

Boeing has forecast a large chunk of its business plans on the Far East. According to the company's estimates, China will need more than 2,600 new airliners, mostly large aircraft, in the next two decades, which could be worth up to $213 billion.

"That's a big chunk of airplanes Boeing won't be making if Chinese carriers are required [to buy their own from China]," says Hamilton. Aviation Industry of China, www.rsleads. com/805tp-211
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Title Annotation:news & analysis
Author:Alpern, Peter B.
Publication:Tooling & Production
Date:May 1, 2008
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