Airbus to source more from China

By Joseph Chaney

HONG KONG (Reuters) - European plane-maker Airbus wants to source more parts from China and grab more market share from arch-foe Boeing (BA.N: Quote, Profile, Research, Stock Buzz) in a market it expects to double every five to six years.

The firm owned by EADS (EAD.PA: Quote, Profile, Research, Stock Buzz), which edged ahead of Boeing this year in the annual race to chalk up more sales, plans to buy as much as $400 million worth of parts from Chinese manufacturers by 2015, Airbus China President Laurence Barron told the Reuters China Century Summit.

Despite a global backlash over the quality and safety of goods made on the world's factory floor, Barron said Airbus would source more and more complex aircraft components, such as wings.

They "started out making basic parts like doors, fairly simple stuff. But a wing is about as complex as air structures get," Barron said at the summit, held in Hong Kong.

"The Chinese aviation industry now has the capability to be a world-class supplier.

"In aviation, you cannot compromise quality. You just can't take the risk."

Airbus sources parts from multiple Chinese manufacturers, including Xi'an Aircraft Company (XAC), an affiliate of listed Xian Aircraft International Corp. 000768.SZ.

LEG UP

China is a pivotal battleground between Airbus and Boeing, both of which are battling to sell jetliners to the country's top carriers: China Southern Air (1055.HK: Quote, Profile, Research, Stock Buzz) (ZNH.N: Quote, Profile, Research, Stock Buzz) (600029.SS: Quote, Profile, Research, Stock Buzz), China Eastern (0670.HK: Quote, Profile, Research, Stock Buzz) (600115.SS: Quote, Profile, Research, Stock Buzz) (CEA.N: Quote, Profile, Research, Stock Buzz) and Air China (0753.HK: Quote, Profile, Research, Stock Buzz).

Travel to and from China, the world's fourth-largest economy, is expected to keep climbing alongside double-digit economic growth and dwindling restrictions.

Boeing currently controls roughly 60 percent of China's in-service fleet, compared to Airbus' 36 percent, but Barron says the arch-rivals should draw level at 50/50 by 2013.

Airbus expects Chinese airlines to need up to 150 of its jets in each of the next five years, including its giant A380s, as they expand to serve a domestic and international travel boom.

Last year, the French firm agreed to set up an aircraft assembly facility with three Chinese partners in the northern port city of Tianjin -- a move Barron hopes will give Airbus greater access to China's booming market.

"There was a specific request made by the Chinese government to both Airbus and Boeing -- we responded positively," Barron said about the firm's plant in Tianjin.

"It's very obvious that if you say yes or no to a government request like that, you're either going to be popular or unpopular -- or maybe more popular than you may have been otherwise," Barron said.  Continued...