New aviation firm takes off in Harbin
By Xu Dashan (China Daily)
Updated: 2004-04-30 08:52

The Harbin Aviation Industry (Group) Co Ltd under China Aviation Industry Corp II (AVIC II) will be established today in Harbin, the capital of Northeast China's Heilongjiang Province.

Establishment of the new company, which is based on the Harbin Aircraft Industry Group and the Harbin Dong'an Engine Group Co Ltd will help reorganize the aviation manufacturing industry in the city.

The new company has total assets of 12.7 billion yuan (US$1.53 billion).

AVIC II President Zhang Hongbiao said the establishment of the new company would greatly increase the competitiveness of AVIC II, the parent company of Hong Kong-listed AviChina Industry & Technology Co Ltd.

AVIC II's sales income grew by a year-on-year 11.4 per cent to 23 billion yuan (US$2.8 billion) in 2003.

Analysts said AVIC II's better performance after the establishment of the new company will further increase investor confidence about the business outlook of the aircraft and mini-car manufacturer AviChina, which raised HK$1.9 billion from an initial public offering on the Hong Kong Stock Exchange last year.

"Cars and aircraft are both high-growth industries in China," said Zhang Xueying, a senior economist with the State Information Centre.

AVIC II is the largest mini-car maker in China, with a market share of more than 40 per cent.

It is also the only domestic mass producer of helicopters and regional jets in China.

Last year, the company's car business, which made up a majority of the total revenue, remained the largest source of income.

The company manufactured 321,000 cars and sold 323,000. It earned 14.7 billion yuan (US$1.8 billion) from sales, an increase of 24.7 per cent from the previous year.

It also earned about 2 billion yuan (US$240 million) from selling auto parts.

As China's economy continues to expand, AVIC II expects its aircraft business to further expand, Zhang said.

AVIC II has a 49 per cent share in a regional jet joint venture with Brazilian aircraft manufacturer Embraer to assemble the Brazilian firm's jets in China.

In December, the first ERJ145 jet manufactured by the joint venture made its maiden flight in Harbin, suggesting the 50-seat jet will soon enter the Chinese market.

China Southern Airlines has already agreed to buy six such aircraft.

Officials with the General Administration of Civil Aviation of China said the central government's western development strategy and the 2008 Beijing Olympics will open opportunities for the regional aviation sector.

About 400 to 500 small aircraft are expected to be purchased in China in the coming 20 years, according to sources with AVIC II.

Zhang said AVIC II also predicts a huge demand for helicopters.

Helicopters are used worldwide because they are easy to fly and land.

At present, China has less than 80 helicopters for general use, meaning there are only 0.06 helicopters for every 1 million people in China.

This is far less than the world average of 3.9 helicopters per every 1 million people.

"The use of helicopters will increase in the coming decades," he said.

Increasing sales of cars and aircraft are only part of Zhang's goal. He said he will help build AVIC II into a large and internationally competitive company.

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