(Bloomberg) -- Airbus SE will double production capacity in China of its top-selling jet in a bold bet on future demand in one of the world’s biggest aviation markets.
The European planemaker will add a second final assembly line for A320 narrow-bodies at its existing factory in Tianjin, under a deal signed by Chief Executive Officer Guillaume Faury in Beijing on Thursday. The move is a boost for Chinese manufacturing as other firms like Apple Inc. rethink production in the nation amid rising tensions with the US.
Read more: Apple Looks Beyond China in Bid to Remake Cook’s Supply Chains
The expansion of the Tianjin facility will be an “important part” of Airbus’s plan to produce as many as 75 A320neo family jets a month by 2026, Faury said on a call with reporters from Beijing. At the plant, which opened in 2008, workers stitch together major sections such as wings and fuselage assemblies, giving the aircraft its final shape. Airbus and chief rival Boeing Co. have struggled to raise output amid supply-chain constraints as demand for passenger planes has surged coming out of the pandemic.
“We’re paving the way for the growth of the market here in China,” Faury said. He was part of a delegation of dozens of French business executives traveling with President Emmanuel Macron, many of whom were returning to China for the first time since the pandemic.
Airbus however, looked set to leave China without a new plane order during Macron’s three-day state visit, despite intensive talks over the past weekend with Chinese customers. Bloomberg reported this week that the company was targeting a follow-on order that would include A350 and possibly A330neo wide-body aircraft.
Faury said Airbus remained optimistic about winning more business in China, where it holds a sizable advantage over Boeing Co.
“We are all discussing with our customers and looking at the future,” said Faury. “Orders, if any — and there will be some I’m sure — will come at a later stage.”
The extra line in Tianjin will bring Chinese production capacity into proportion with its share of global demand, Faury said. It will come into service in the second half of 2025. The planemaker now produces four A320s a month in Tianjin, and Faury said it plans to raise the monthly rate to six later this year, restoring a pre-Covid goal.
The new investment will eventually bring capacity to 12 a month with the potential to go higher, Faury said. While Tianjin now serves only Chinese customers, planes assembled there could potentially be delivered elsewhere, but these would be case-by-case decisions, he added.
In Beijing, Faury also signed a so-called general terms agreement, formalizing previously announced orders covering 160 aircraft, including 150 A320 family jets and 10 A350 wide-bodies, according to statements from Airbus and Macron’s office. Chinese carriers ordered more than 300 narrow-body aircraft from Airbus last year, valued at more than $40 billion before customary discounts. Airlines in China make up about a fifth of Airbus deliveries.
China, with its massive global tourism potential, is only just starting to emerge from a three-year freeze on international travel because of its Covid-19 border shutdowns.
Tensions between Washington and Beijing have also been on the rise, providing Toulouse, France-based Airbus with an opening in an important market while Boeing has been effectively locked out, with no major deals signed in China since 2017.
The largest US exporter is still waiting on airlines there to restart deliveries of its re-engined 737 Max jet. China Eastern Airlines Corp. and China Southern Airlines Co. have said they plan to start accepting more of the model this year. The popular single-aisle jet resumed flying in China in January after almost four years, following two fatal crashes that precipitated a global grounding.
Boeing’s main manufacturing plants are in the US although it does have its own completion and delivery center for the 737 Max in Zhoushan in Zhejiang province, where aircraft are painted and interiors are fitted. The partnership with Commercial Aircraft Corp. of China opened in 2018. At the time, Boeing said Chinese customers accounted for one-third of Max deliveries, underlining the importance of the growing market.
While Airbus secured substantial orders in China last year, Boeing has picked up momentum elsewhere. It edged out its European rival to win a narrow-body deal with Japan Airlines Co. last month, while scooping up a $37 billion order from Saudi Arabia’s Saudia airline and new carrier Riyadh Air. Airbus and Boeing shared the spoils from Air India Ltd’s mammoth 470-plane order in February.
Large plane orders have become a customary goal of trade visits. Airbus locked in a $35 billion deal for 300 jets during Chinese President Xi Jinping’s visit to Paris in March 2018.
(Updates with comment from Airbus CEO Faury from third paragraph)
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