Airbus took a step on Friday toward opening a second plant in China by signing a letter of intent with Chinese authorities to set up a cabin completion center for its wide-body A330 jets.
The tentative agreement, signed in Berlin during a visit by Chinese Premier Li Keqiang, coincided with a deal to sell 70 smaller A320-family jets worth $7 billion at list prices.
The world's second-largest planemaker after U.S. rival Boeing (BA.N) has been in talks for some time to try to expand its footprint in China as a way of supporting sales of its A330 jetliner to the world's fastest-growing aviation market.
Airbus already assembles some of its A320-family aircraft in the northern port city of Tianjin, where it also plans to bring virtually completed A330s to have their cabins fitted for the Chinese market if the two sides reach a definitive agreement.
However, industry analysts say the move depends on winning support from Chinese airlines for a dedicated regional version of its A330 for the busy domestic market, which in turn faces competition from Boeing.
"We believe there is a big market for A330s, especially for domestic use in China because of airport congestion," Fabrice Bregier, chief executive of the main planemaking subsidiary of Europe's Airbus Group (AIR.PA), said after a signing ceremony.
"We looked at what could be done from an industrial perspective. The project is not formally launched. We are testing the market to see how it reacts to our proposals around the A330."
Asked if Airbus was close to signing deals with China to sell A330s, Bregier said: "It's step by step. There is a trajectory and we are well placed on this trajectory."
CHINA MARKET TO BE NO.1
Reuters reported on Thursday that Airbus may sign a letter of intent for the A330 cabin plant and secure a new plane order during Li's visit.
In March Airbus extended its agreement to assemble some of its A320 medium-haul jets in Tianjin and said it hoped to make progress within a year on discussions over the possible cabin center there for the long-haul A330 model.
Airbus aims to increase A330 sales to China and ensure smooth production of the 20-year-old aircraft family by offering a medium-haul version tailored to China's domestic market.
Boeing is offering its newer 787 Dreamliner and combinations of smaller 737s, according to industry sources.
China meanwhile has ambitions to break into the $100 billion annual market for passenger jets, but still depends on large volumes of imported jets from the two major Western planemakers.
Some industry officials believe it has under-estimated its needs in recent years and may have to accelerate jet orders.
China is the world's fastest-growing airline market and is set to outstrip the United States as the biggest single market for air transport within 10 years.
The latest deal for 70 jets, signed between Airbus and China's central purchasing agency, has yet to be finalised but "has the value of a firm order," Bregier said.
"Now we are very close to having a 50-percent market share on the Chinese market," he added.
Bregier said the 70 aircraft, which have yet to be allocated to individual airlines, include current-generation A320 and A321 models, with list prices of $94 million to $110 million.
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