Special Supplement: Powering into international market

By Bian Yi | China Daily | Updated: 2007-09-18 07:24

Xi'an Aero-Engine (Group) Ltd is on the fast track of international cooperation.

Based on subcontracting business, the company saw its foreign trade volume hit a record high, going up from $127,000 in 1981 to $120 million in 2006.

Compared with the previous year, its export increased by 43 percent last year.

As an aero-engine research and production base and China's backbone gas turbine manufacturer, Xi'an Aero-Engine is a multi-sector company in which China Aviation Industry Corp I (AVIC I) has a major stake.

While its focus is on aero-products, the company's business also covers national defense, and civil and foreign project subcontracts.

The firm has been ranked at the forefront of China's aviation sector in terms of aero-product exports for years.

Backed by its technological edge, Xi'an Aero-Engine was one of the earliest pioneers in China's engine sector and became involved in subcontracting for foreign companies in the form of compensation trade in the early 1980s.

The first overseas market order it won was from RR, a British aviation company, for aviation engine blades.

Worth $7,000, the deal, though not big, marked the Chinese company's entry into the international aviation market.

To sharpen its competitive edge, Xi'an Aero-Engine has conducted six technological upgrades and invested 400 million yuan in revamping production facilities since 1989.

The company values and uses advanced managerial expertise, such as Total Process Control, Statistical Process Control and Six Sigama to help improve its performance.

Xi'an Aero-Engine has developed a comprehensive and strict quality control system, which plays a key role in maintaining the company's strong competitiveness in the overseas market.

The system includes component inspection, on-spot quality management, system review, special production procedure examination, and disqualified product control.

The firm's efforts at quality improvement have paid off. Since 1998, more than 96 percent of its output has met the required standards.

Further, the company has received a number of quality certifications from international organizations, including ISO9001 from the International Standardization Organization, BVQI AS9100 from the International Quality Inspection Bureau of France and the final random inspection certificate of the National Aerospace and Defense Contract Accreditation Project of the United States.

Quality products have won the company its reputation among foreign purchasers as a reliable provider.

The worldwide goodwill it enjoys is reflected in the company's export figures. In the past five years, Xi'an Aero-Engine has exported goods worth $453 million, while export revenues accounted for 27.6 percent of its total sales last year.

Absorbing new elements

In the 1990s, Xi'an Aero-Engine established three joint ventures with its foreign partners-Britain-based RR, US-based Pratt & Whitney, Israel-based Blades Technology International, and Germany-based Duisburg-Walsum.

Participation in running the joint ventures has given the company an opportunity to absorb managerial expertise. This has helped it to shift its operational mechanism from being production-oriented to market-driven.

The company also places a high premium on the development of human resources, especially in key fields.

Its skilled workforce is seen as an important contributor to ensuring the firm's efficient operation and sustainable growth.

In addition to recruiting fresh college graduates, the company's executives have also formulated a training plan for building an even more efficient team.

Moving ahead

During the 11th Five-Year Plan (2006-10), Xi'an Aero-Engine's total export is projected to reach $900 million, though company executives have set $1 billion as their final goal for total export value during the period.

To this end, the company plans to establish new production facilities, seeking to expand production capability.

According to the shaanxi.cnwest.com website, the aviation company has pledged to invest 1 billion yuan in setting up an aero-component plant in the Xi'an Economic Development Zone.

The plant is expected to generate an annual output worth $260 million after becoming fully operational.

As a key component provider to big companies like GE, RR and SNECMA, Xi'an Aero-Engine intends to make the new plant a key export base for aero parts.

The company has developed an extensive distribution network, involving more than 35 foreign providers and serving 15 European and US customers.

The firm's risk and revenue sharing partnership with GE marks an upgrade in business cooperation between the companies, from subcontract to strategic partnership.

Greater involvement in internationalization is expected to contribute to the increased growth of the company.

Branches in North America and Europe are also in the offing, revealed company executives.