CORRECT: GE Venture Gets Contract As China Aircraft Moves Ahead
12 Luglio 2010 - 10:38PM
Dow Jones News
China is close to finalizing the overseas partners for a new
home-grown passenger jet project that is being closely watched as a
sign of its technological prowess.
The state-owned Commercial Aircraft Corporation of China, or
Comac, on Monday signed up General Electric Co. (GE) and
joint-venture partner Aviation Industries of China with a letter of
intent to supply avionics systems for the C919 jetliner.
The system proposed by the partners will be the "central
information system and backbone" of the aircraft, hosting cockpit
displays and maintenance and utility functions, GE said.
Rockwell Collins Inc. (COL) was selected to provide
communications and navigation systems. The two announcements come
days after Honeywell International Inc. (HON) was selected to
provide wheels and brakes for the plane, which is expected to enter
service in 2016.
China is investing heavily to promote the 150- to 200-seat jet
and aims take a third of the market for single-aisle planes that is
now divided between Airbus (ABI.YY) and Boeing Co. (BA). That
target is viewed by industry executives as ambitious, but the
plane's potential success could have an impact on trade balances
between China and the U.S. and the European Union. Even if the
plane only sells in China, it will shrink one of the industry
leaders' most lucrative markets.
"China has been an extremely reliable customer [for Airbus and
Boeing] through the economic cycle," said Scott Hamilton at Seattle
consultant Leeham Co. LLC.
Boeing, which plans to update its long-term outlook later this
week, estimates Chinese carriers will need more than 2,000 new
single-aisle jets between now and 2028.
The C919 project was unveiled in 2008 amid fanfare that low
manufacturing costs could make it a global competitor. The plane is
due to fly by 2014 and enter service with Chinese airlines two
years later.
Comac's lack of experience and infrastructure in servicing
planes outside China has since tempered expectations about the
C919's impact, but suppliers are keen to enter partnerships with
the plane's maker and secure a share of its domestic market
potential.
The GE and Honeywell contract awards tie up most of the loose
ends for the C919. Comac had intended to finalize its partners by
January, according to people familiar with the process. Units of
Parker Hannifin Corp. (PH) and United Technologies Corp. (UTX) have
also been signed up to make key components.
Completing the supplier roster will likely result in more
details emerging on the C919's potential performance. While
observers expect it to lag rival Airbus and Boeing planes, the jet
could pave the way for a more competitive Chinese aerospace
industry.
"I regard the C919 and the ARJ21 as proof-of-concept planes for
better products to come," said Hamilton, referring also to a
smaller Chinese jet that is under development.
GE is already a partner on the ARJ21 program, having signed up
to provide the engines, and its leasing arm has ordered five of the
aircraft. It also is lined up to provide engines for the C919
through its CFM International joint venture with France's Safran
(SAF.FR). The engines have a list price of $14 million per
two-engine plane.
The C919 deal is the first major contract for a joint venture GE
is forming with AVIC to sell avionics for aircraft projects inside
and outside China. The parties declined to disclose the value of
the contract, but Kevin Michaels, a partner of AeroStrategy LLC, an
aerospace consultancy in Ann Arbor, Mich., said it could be worth
more than $1 billion over 20 years if China builds the targeted
2,300 aircraft.
"This aircraft was and is very strategic for GE," Michaels
said.
Jennifer Villarreal, a spokeswoman at GE Aviation, said the
conglomerate is waiting to hear on two more supply awards for the
avionics on the C919, although Monday's announcement was "the major
one." GE isn't troubled by delays in lining up the Comac's
partners. "It takes a while to work the details out," she said.
Comac is starting to market the C919 to Chinese airlines, with
the country's top three carriers widely expected to announce an
initial 100-plane deal later this year.
In a sign of things to come, the first order isn't expected at
the aerospace industry's main jamboree--the Farnborough
International Air Show that starts at the weekend--but at the
Zhuhai Air Show in November.
Michaels predicts Comac will have a tough time building the
plane by 2016 and likely won't build the full 2,300. "There's a
good chance of it slipping beyond 2016," said Michaels. "There's a
tall order on systems integration and supply chain. There's a lot
of moving parts here for them to pull something together in
something they've never done before."
Later Monday, diversified industrial manufacturer Eaton Corp.
(ETN) disclosed it signed a joint-venture agreement with Comac to
support the aircraft program, whose value for Eaton the company put
at $1.8 billion. The effort will focus on design, development and
manufacturing for the global civil aviation market.
The latest announcement comes following a joint-venture
framework agreement signed between Eaton and Comac in December.
Comac will own a 51% interest in the effort.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com
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