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Ascend by Cirium Weekly Team Perspective:  Un Très Bon Voyage en Chine?

April 25, 2023

French President Emmanuel Macron has returned from his state visit to China last week. His French business delegation is announcing big numbers on the deals made during this trip, with Airbus.

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Ascend analyst Tim Chun Hing Li

By Tim Chun-hing Li, Aviation Analyst at Ascend by Cirium

French President Emmanuel Macron has returned from his state visit to China last week. Whilst his comments on Europe’s position on the Taiwan Strait Crisis had sparked much controversy on both sides of the Atlantic, his French business delegation is announcing big numbers on the deals made during this trip, with Airbus confirming the signing of a General Terms of Agreement (GTA) of 160 Aircraft, an agreement to open a new A320 family Final Assembly Line (FAL) in Tianjin and the purchase of 50 of Airbus Helicopters’ latest H160 by a private Chinese operator.

The purchase of 160 Airbus Aircraft, however, does not result in an increase in Airbus’s backlog. The order of the 150 A320neo family in this agreement has already been on the order book since July 2022, when the “big three” state airlines of China pledged to buy a total of 292 aircraft. The A350 orders can be traced back to March 2019 during Chinese President Xi Jinping’s visit to France.

 A319neoA320neoA321neo
Air China5950
China Eastern Airlines 3268
China Southern Airlines92364
Shenzhen Airlines (Air China Subsidiary)1814
            Source: Airbus Orders and Delivery 2022

Nonetheless, it is a relief for Airbus to proceed with these previously unconfirmed orders given that the market is doubtful whether the post-COVID Chinese market has the appetite to digest them. The recovery since the giving up of Beijing’s zero COVID policy shows how quick the bounce back of the Chinese Domestic Market can be. Cirium Schedules data shows that daily capacity (in ASK terms) averaged 15% up over 2019 for YTD in 2023 and projecting the change goes over 35% in this quarter, a big rebound compared to -20% in Q3 2022.

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Source: Cirium Schedules, 9th April 2023

Even though no new actual orders were placed, the news is still a resounding message to Boeing and the White House that China appears to be favouring Airbus more as the US-China relationship is getting even tenser. The Airbus A320neo family order book currently has a backlog of 392 aircraft in China, leading the Boeing 737 Max family of 221 by 75% (including the 129 grounded undelivered MAXs, excluding Greater Bay Airline’s order of 15 aircraft). At present, the MAXs order book is very likely to further diminish with Air China planning to take no deliveries in the next three years. It is also no secret that some of these undelivered MAXs may eventually be remarketed to other operators.

Beijing may hope Boeing’s loss can be COMAC’s gain. Nonetheless, even though the COMAC C919 has a tally of 502 orders in China (excluding options and LOI), it is worth noting that only 60 of them are from local operators. Even leaving aside the certification hurdles and unknown production pace of C919, the negligible order of just 20 aircraft from the “big three” makes it reasonable to question whether C919 has gained confidence even within its own turf, at least in the near future.

On the other hand, the announcement of the expanding of the Airbus Tianjin Facility, with a second A320 Family Final Assembly Line would appear to be a win-win deal for the European OEM and China. Together with the Mobile, AL site expansion last November and conversion of ex-A380 FAL in Toulouse, Airbus will have a total of 11 FALs around the globe for the A320 Family.

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Source: Cirium Fleet Analyzer, 11th April 2023

Supply chain issues have continue to affect Airbus, curtailing its production and delivery speed after the pandemic, erasing the capacity growth Airbus had achieved over the last decade. The reduced supply of new aircraft pushes up the values of the new narrowbodies. Moreover, with the large backlog, Airbus said the next earliest available slot of the A320 Family will be in early 2029,  admitting that the long queue is affecting sales prospects.

Source: Cirium Fleet Analyzer, 11th April 2023

The new FAL in Tianjin will hopefully play a vital part in Airbus’s plan to crank up the A320 Family production rate to 75 aircraft per month by 2027. Since its first delivery in June 2009, Tianjin site has delivered 602 A320 family aircraft, nearly all of which are first operated by Chinese operators. Nevertheless, Tianjin’s delivery only takes up 35% of the total A320 family that was originally delivered to China during the same period. Doubling up the final assembly capacity allows an easier delivery process to be done locally, as well as free up capacity in Toulouse and Hamburg to other customers.

While the commercial division may have taken the headlines, There is also the announcement of 50 orders for Airbus Helicopters new medium twin helicopter – the H160 – to General Dynamics Aero Tech (GDAT) Shanghai.

H160 is a medium utility helicopter developed by Airbus Helicopters to serve as a replacement for the long-reigning AS365/EC155/H155 Dauphin family. First flown in 2015 and first delivered in 2021, the type however has yet to be dually certified, as FAA certification is still in progress. Only six aircraft have been delivered so far and its order book was minimal with just 60 orders and lacks lessor involvement.

Source: Cirium Fleet Analyzer, 14hh April 2023

GDAH’s order of 50 aircraft has nearly doubled up the H160 order book and supports the signs already observed of an increased appetite for helicopters in the Chinese market. China has the fifth largest civil turbine helicopter fleet by country in the world and a young average vintage of just 12.2 years. Utility is the biggest market sector, taking up 42% of the total Chinese fleet. This deal helps maintain Airbus Helicopter’s leadership in the growing Chinese market. Although it is too early to say whether there will be a closer partnership like establishment of a FAL, it is a logical direction given that there is already a H135 FAL in Shandong and licensed production of a Chinese variant H175, the AVIC/Harbin AC352.

Afterall, behind the deceptive headline number of “160 new orders”, the expansion for a second FAL and the helicopter deal are still “très bon” for Airbus. With US-China ties under strain and development challenges for the C919, the European OEM still have lucrative opportunities to fill the void in the Chinese market.



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