Soaring sales

Making a smooth transition into a new job in a foreign country is a challenge for anyone, especially for those who have little work or travel experience in their new home.

But not Airbus China President Laurence Barron when he moved from Airbus headquarters in France in January 2004 to lead the company's operation in China.

"I found the transition relatively easy. Things have turned out far more busy and far more exciting than what I had anticipated," says Barron, adding that he was too busy to contemplate the transition.

When Barron came to China, Airbus aircraft only accounted for 23 percent of the Chinese fleet in service. But by the end of 2007, the figure had shot up to 37 percent. China is also becoming increasingly integrated into Airbus' industrial production, from supplying components to hosting the company's first aircraft final assembly line outside Europe.

"I didn't expect the sales volumes. Nobody ever dreamed we would build a final assembly line anywhere outside Europe," Barron says. "We had a lot more success than we had expected."

Airbus' success story in China reflects how the country's aviation industry has taken flight.

Since 1978, the country's air traffic has maintained an annual growth rate of 18 percent, almost double of China's average GDP growth rate and three times the world's average growth rate of air transportation during the same period, according to figures from the General Administration of Civil Aviation (CAAC), the nation's industry watchdog.

China will remain the world's largest commercial aircraft market outside the United States for the next 20 years, according to estimates by US aircraft manufacturer Boeing. It forecasts China will need about 3,400 new airplanes, worth $340 billion, over the next two decades, and the country's fleet will nearly quadruple to 4,460 by 2026. Airbus has similar forecasts that China, driven by a double-digit economic growth rate, will need 100 to 150 aircraft per year for the next 20 years.

Making its mark

Airbus sold its first plane to China in 1985, when Boeing had a 13-year head start. The aircraft, an A310, was delivered to the Shanghai branch of the CAAC, which later became China Eastern Airlines. Airbus China Co Ltd was established in 1994.

With only a 7-percent market share in China in 1995, the European company was unknown to most Chinese people. Some thought it was an airport shuttle bus company, while others said it was a bus producer. Few linked its name to aircraft manufacturing.

But the European company was committed to long-term development in China.

The Chinese airline industry transported 185 million passengers last year, up 15.9 percent year on year. The Chinese airlines only carried 3.43 million passengers in 1980. China only had 140 airplanes in 1980, but it now has a fleet of over 1,000 planes.

China is expected to replace France as the world's top tourism destination by 2014 and it has already overtaken Japan to become Asia's largest source of outbound travelers. The flourishing economy also makes the country one of the top draws in global business travel market.

The civil aviation industry also went through a series of reforms that included allowing private investors to set up airlines, simplifying procedures for approving new air routes, and allowing foreign investment in airlines and airports. China also opened its skies wider to foreign airlines and signed bilateral aviation agreements with 106 countries by the end of 2006, according to the CAAC.

"Our growth was certainly not possible without the reform and opening up of the market here," Barron says.

Commitment to customers

Besides providing the right products for the market, Barron says timely and efficient customer support and service has also helped Airbus achieve fast growth in China.

The Toulouse, France-based company set up an aviation training and support joint venture in 1996 with China Aviation Supplies Import and Export Group Corp. The center, a 50-50 joint venture, is located near the Beijing Capital International Airport. It was the first of its kind built by a foreign aircraft manufacturer in China that combined simulator training for airlines and customer support facilities.

The customer services department provides on-site technical support for airline operations in 20 Chinese cities.

Airbus has a network of spare parts and support centers in Beijing, Frankfurt, Hamburg, Singapore and Washington, DC. It has a spare parts warehouse valued at more than US$30 million in Beijing and contracted another one in Shanghai in 2006.

The Airbus customer support center in Beijing is working toward a regional hub that serves the whole Asian market. Some of the Chinese engineers have been traveling to serve regional customers in Myanmar, Vietnam, Siberia, Indonesia and Cambodia.

While fighting head-to-head with Boeing on "traditional battlefields" - China's three largest airline groups - Airbus is also expanding on an emerging market: start-up private air carriers.

"Our strategy is to establish stable relationships with all our customers, from the biggest to the smallest, from major airlines to regional airlines and start-ups," Barron says.

Currently four out of the seven private carriers in China are flying Airbus A320 family aircraft.

"These start-up airlines all have ambitious plans to expand their fleet. Nobody would neglect this market," says Liu Weimin, director of the Aviation Laws Research Center at the Civil Aviation Management Institute of China.

A major reason for Airbus' success with Chinese private airlines, Barron says, is its close partnership with international leasing companies such as GE Commercial Aviation Services and International Lease Finance Corp. The four Chinese private airlines started their businesses by leasing Airbus aircraft.

Due to strong market demand, the new aircraft manufactured by both Boeing and Airbus have basically been on order for the next five years so that it is difficult for them to meet short-term needs. But for start-up companies, the primary question is how to purchase new aircrafts as soon as possible for business operation.

However, since one-third of Airbus A320 family aircraft have been sold to international leasing companies, it might be a way for the start-up companies to have aircraft available much sooner by cooperating with those leasing firms, says Barron, who has specialized in aircraft financing at Airbus for more than 10 years.

(China Daily 03/24/2008 page6)