Tianjin plant a symbol of relations between China, Germany, Wen says

Premier Wen Jiabao and visiting German Chancellor Angela Merkel joined the celebration on Friday for the 100th A320 jetliner made in China as Chinese and European partners declared they will extend their contract on the Airbus assembly joint venture.

Hailed by Wen as a symbol of friendly Chinese-German ties, the assembly factory, whose contract is due to expire in 2016, will continue operating to 2026 and sell not only to domestic airlines but also international companies.

Located in Tianjin, a northern Chinese port city, the factory was founded in 2005 and its first product was completed in 2008.

Wen was present on both occasions.

He said German technicians at the factory were like teachers to the Chinese workers. He praised their contribution to the assembly factory's success.

The relationship between China and Germany - in which common interests and joint efforts in overcoming difficulties have borne the fruit of cooperation and innovation - has set an example for the world, Wen said.

Merkel noted that China is the second-largest market for civil aircraft in the world.

The country's demand for more aircraft will benefit Germany, Airbus and its assembly factory in Tianjin, Merkel said, adding that in 2015 Airbus will purchase components worth nearly $500 million from China.

The Tianjin assembly factory is a joint venture between Airbus and a Chinese consortium comprising the Tianjin Free Trade Zone and China Aviation Industry Corporation, in which the European aircraft maker holds a 51 percent stake and the Chinese consortium holds the rest.

Laurence Barron, president of Airbus China, said an agreement in principle was signed by Airbus, Tianjin Free Trade Zone and the Aviation Industry Corporation of China on Thursday to extend their joint venture for another 10 years.

The plant is expected to produce the A320 neo, a new engine for the A320 aircraft that is scheduled to enter service in 2015 and boasts it can deliver 15 percent fuel savings.

"All plants will produce neo in the future," said Barron. "We will phase out the current aircraft program when the neo is in full production."

He said the airplanes assembled in Tianjin are also aimed at the global market. By the end of this year, Airbus plans to deliver an aircraft to ICBC Financial Leasing, the leasing arm of the Industrial and Commercial Bank of China. Air Asia, a Malaysian company, is expected to operate the plane.

"The leasing business is a global business. This is the way of the future," Barron said. ICBC Financial Leasing signed an agreement with Airbus to buy 50 Airbus A320-family planes on Thursday, including 20 A320 neo aircraft. The deal is worth $3.5 billion, based on catalogue price.

There are still many details to be hammered out through negotiations, Barron said, and the plan will not result in a final agreement until the middle of next year.

"Having a final assembly line in Tianjin has greatly promoted the Airbus brand and image in China and brought us closer to our customers in one of the world's most important aircraft markets," said Fabrice Bregier, Airbus president and CEO.

Li Xiaojin, a professor at the Civil Aviation University of China in Tianjin, said the extension of the assembly line is great news for Airbus, bringing the market closer and lowering manufacturing costs to better compete with its competitor Boeing. He said the aircraft produced in China will have more access to the Asian market where the demand for aircraft is surging.

The Tianjin assembly factory owns the third single-aisle aircraft final assembly line following Toulouse and Hamburg. It delivers three planes a month, which it hopes to increase to four by the end of this year, Barron said. So far, the plant has delivered 97 aircraft to 11 domestic airlines.

On Thursday, Eurocopter also signed a Memorandum of Understanding about setting up the China Completion Center in Tianjin to complete and customize light helicopters for the Chinese market.

Eurocopter and the Tianjin Free Trade Zone will form a joint venture for this center, with a target to start operations by the end of 2013. The helicopter maker has a 40 percent market share in China.

German auto giant Volkswagen established a new gearbox plant on Friday in the Tianjin Economic-Technological Development Area, with production scheduled for the first half of 2014. Investment in the project is 900 million euros ($1.13 billion).

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Li Xiang contributed to this story.