AVIC Leads China’s Drive to Become an Aerospace Powerhouse
(Source: Forecast International; issued Dec 15, 2016)
As China continues to refine its aviation dreams, Aviation Industry Corporation of China (AVIC) remains at the forefront. The company leads that nation’s drive to become a major aerospace power. As such, it has been subject to numerous changes throughout the years. Most recently, the government has borrowed a page from Western corporate practices and begun to focus the firm on its core operations in airframe manufacturing.

Under this effort, a new company has been formed, called Aero Engine Corp of China (AECC). The majority of AECC’s operations were separated from AVIC, which now is centered on airframes and related systems. For the time being, AVIC still has some unrelated aviation operations under its aegis, but these may be separated at a later date should they prove a distraction to the company. AVIC and COMAC (which was also formerly part of AVIC) are both shareholders in AECC.

For its part, AECC is tasked with developing China’s gas turbine industry – an area that has long been the weak link in the country’s aviation ambitions. Over the last few years, China has made a concerted effort to build its gas turbine market by investing heavily in research and development. The new operation will have its work cut out for it as it seeks to marshal the provincial attitudes of the firms under its umbrella. China’s state organizations guard their independence fiercely, and trying to blend firms that work on military programs with those that cover commercial enterprises is expected to be an arduous task.

In terms of aviation programs, AVIC works hand in glove with COMAC on two of China’s premier aircraft programs, the C919 narrowbody airliner and the ARJ21 regional jet.

The first C919 was rolled out in late 2015 and has spent the past year being prepped for its first flight, which is now expected in early 2017. This all-new narrowbody airliner is designed to compete directly against Airbus’ A320 family and Boeing’s 737.
COMAC’s inexperience in testing and certificating civil airliners will lead to a long, drawn-out flight test program. COMAC may have gained experience through the long-delayed ARJ21 program, but even Airbus, Boeing, and Bombardier have trouble keeping to aggressive schedules with all-new aircraft. Service entry in the Chinese market is unlikely to occur until late 2019 and may even be delayed until the early 2020s.

Nevertheless, the program is a milestone for China. One advantage the C919 program possesses versus Western competitors is that it is largely insulated from the financial pressures placed on Western manufacturers. The Chinese government wants to build an indigenous capability to produce airliners competitive with those built by Western companies, and the program will therefore continue for as long as the Chinese government wants it to, regardless of whether the aircraft racks up major sales from airlines outside China.

As AVIC continues to develop itself as a manufacturer, the company is recognizing its limitations, such as a lack of experience, aviation talent, and infrastructure. As AVIC seeks to become more of a developer than a duplicator, the need for outside technical acumen becomes acute. To fill these gaps, the firm is forming teaming arrangements or acquiring the necessary acumen to be successful.

The company has successfully teamed with Western manufacturers such as Bombardier, Parker Aerospace, and Safran to help educate its operations. Not only do these partnerships help in the here and now, but they also plant the seeds for future collaboration. And it is this long view that guides AVIC’s strategy to become a world-class aircraft developer.

In addition, the company has complemented and expanded its international footprint with acquisitions. Most recently, the firm acquired AIM Altitude, a manufacturer of aircraft interiors, and Aritex, a riveting systems specialist. These two operations add to AVIC’s growing international footprint, which includes Fischer Advanced Composite Components (FACC) and Thielert in Europe and four acquisitions in the United States: Continental Motors, Epic Air, Cirrus Aircraft, and Align Aerospace.

The acquisition of these enterprises is of major importance to AVIC, as they provide the firm with access to advanced foreign technologies that can be exploited under China’s well-established civil-military integration strategy. The company is targeting small to midsize operations with technological capabilities in the commercial aerospace sector. These skills will be leveraged into the firm’s current civil aircraft programs and then incorporated into military spheres.

This latter quest has caused some concern in the U.S., with AVIC’s deals being heavily scrutinized and criticized. While the deals were ultimately approved, Congress voiced concerns that AVIC would adapt some of the technologies for weapons systems and/or transfer work to China. China has made no secret that it is looking to improve its military technology, and sees the adoption of civil technology as a means to this end.

China continues to aggressively market AVIC on the world stage as well. Reports from air shows indicate that AVIC has stepped up its marketing savvy and aims to be an intense competitor.

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