Cessna close to finalizing deal with China’s AVIC
11/14/2012 7:59 AM
08/08/2014 10:13 AM
Cessna Aircraft Co. is getting close to finalizing a deal with the Aviation Industry Corporation of China, or AVIC, to provide Cessna planes to the Chinese market.
Negotiations are under way for a joint venture to build the market for Cessna’s Caravan, Cessna CEO Scott Ernest said in an interview at the recent National Business Aviation Association’s annual conference.
The Caravan is a good product for China, Ernest said.
“It’s a good people mover,” he said. “It can land anywhere.”
He expects the deal to be finalized by the end of the year. Initially, the plan would be to build the Caravan in the U.S. and fly it to China for paint and interiors.
Eventually, “we might transfer some part of the manufacturing,” but never all of it, Ernest said.
Serving the Chinese market would create more jobs in Wichita, where the planes are built, he said.
After the Caravan, the company is also considering something similar with the Citation XLS and Sovereign for China, Ernest said.
First, “we’re trying to get the first one done,” Ernest said. “Then we’ll decide what the next one will look like.”
In March, Cessna signed an overarching agreement with AVIC to form joint ventures related to the development of general aviation businesses in China, the company said at the time.
That includes the establishment of a service network.
It also signed an agreement with AVIC Aviation Techniques Co. and the Chengdu government to start negotiations for a joint venture producing mid-size Cessna business jets, as well as a potential new product for the business jet market, Cessna officials said in March.
“AVIC had the opportunity to go with anybody,” Ernest said. “They picked us. They’ve met a lot of the team.”
This week, Wichita’s planemakers – including Cessna Aircraft, Hawker Beechcraft and Bombardier – are at the 2012 China International Aviation & Aerospace Exhibition in Zhuhai, Guangdong, China.
More than 10 percent of the world’s billionaires reside in China, Francis Chao, managing director of the China Civil Aviation Report, said in a press conference at NBAA.
That figure is growing, and most analysts see a growing market in China for business jets.
The central government’s outreach policies are triggering the need for business aviation, Chao said. And there’s lots of room to grow.
However, operations are still restricted and reform is needed, Chao said.
The Chinese government is freeing up more airspace for civilian use, Sean McGeough, president of Hawker Beechcraft’s business in Europe, the Middle East, Africa and Asia Pacific, said in a statement.
“The strong promise of the Chinese market for business and general aviation is being realized,” McGeough said in the statement. “As a growing economy, the freeing up of more airspace for civilian use and a fast improving infrastructure are major factors in this. We are fortunate to have been an active part of this dynamic market for more than three decades.”
China’s work to reform the management of the country’s low-altitude airspace will drive demand for all types of airplanes, particularly smaller ones, he said.
“We’re seeing increased sales activity for our piston and turboprop aircraft in China, so clearly it is developing an appetite for shorter range, smaller aircraft,” McGeough said. “It is no surprise that in terms of long-term growth, China represents one of the most exciting markets for us, and we aim to further enhance our leadership position and expand our local presence.”
More than 60 percent of aviation finance experts interviewed by Hawker Beechcraft said they expect demand for business aviation financing in China to grow substantially between now and 2017, the company said.
Cessna is working with AVIC and the governments in various regions of China, Scott Donnelly, CEO of Cessna’s parent company, Textron, said last month in a call with analysts.
“We are actively engaged,” Donnelly said.
Getting through the negotiations and having three parties at the table isn’t easy, he said. But the company is working through that.
“I think we’re making good progress,” Donnelly said.
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