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  • PRC Military-Industrial Complex

    China aviation giant spins off defence branch: report

    http://news.yahoo.com/s/afp/20090327...20090327021515

    by Staff Writers

    Beijing (AFP) March 27, 2009

    China's largest aircraft maker has spun off a 7.3 billion dollar independent defence manufacturing branch that will seek to produce top military hardware for global markets, state media said Friday.
    The Aviation Industry Corporation of China (AVIC) established the aviation defence branch office Thursday in Beijing to separate the plane manufacturer's civilian and defence operations, Xinhua news agency said.

    The new branch will take over most of AVIC's defence business and oversee 10 assembly plants and research institutes which have combined assets of 50 billion yuan (7.3 billion dollars), the report said.

    "We are trying to become a world leading defence products supplier by expanding our overseas market for export," the report quoted Wang Yawei, general manager of the defence branch, as saying.

    Building combat aircraft, including China's homemade third generation fighter jet the J-10, will remain a core task for the branch, it said.

    Xinhua did not give a formal name for the defence branch, which will also continue to manufacture AVIC's L-15 Falcon, a supersonic training aircraft, and the FC-1 Fierce Dragon, a light-weight multipurpose fighter, for export.

    In November 2008, the Chinese government formed AVIC by merging the nation's two largest airplane manufacturers in an effort to establish an aviation giant.

    AVIC owns 22 listed companies in China, Xinhua said.
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

  • #2
    http://www.aviationweek.com/aw/gener...ustry%20Reform


    China Steps Up Defense Industry Reform

    Apr 3, 2009

    By Bradley Perrett

    BEIJING — China is accelerating reform of its military aircraft sector by bringing forward the establishment of a company that will be its national defense champion.

    Government and industry leaders have dropped plans to initially restrict the new business — a maker of fighters, trainers, drones and missiles — to the status of a division of national aeronautics conglomerate Avic.

    Instead, the organization has now been set up as a company under the name Avic Defence.

    The change is more important than it may seem, because it implies greater autonomy from the head office and a faster rate of reform.

    Avic Defence has almost 60,000 employees. Capital amounts to almost 50 billion yuan and sales are 30 billion a year, only a small fraction of the target of 160 billion for 2017 that has been set for General Manager Wang Yawei.

    The company chairman is Li Yuhai, deputy general manager of Avic, who warns that it will not be easy for Avic Defence to meet the requirements placed on it.

    “Challenges for Avic Defence are raised by demands for network-centric and integrated air-surface warfare, and by the development of stealth, high-mobility and autonomous technologies,” he says.

    The three previously unidentified maintenance businesses that Avic Defence is absorbing have also been named. They are Jilin Aircraft Maintenance Co. Ltd., Changsha No. 5712 Aircraft Industry Co. Ltd. and Tianshui Aircraft Industry Co. Ltd., each named after the cities in which they are based.

    Unlike the subsidiary units of Avic Aircraft, which are to be dissolved, the companies under Avic Defence are supposed to remain as separate entities — probably because the Chinese armed forces are used to dealing directly with the factories, such as Shenyang Aircraft and Chengdu Aircraft, and want to keep doing so.

    But in view of the unexpected acceleration of Avic Defence’s corporate status, it would not be surprising to see top management eventually win a battle for elimination of subsidiary structure, which would likely stand in the way of full rationalization of the business.

    Avic Defence has extensive ambitions for nonmilitary and nonaeronautic business, which Wang says he needs to meet his 2017 sales target.

    The unveiling ceremony was attended by the deputy commanders of the Chinese air force and navy. No army participation was mentioned.

    Photo: Douglas Barrie
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    • #3
      Avic Aircraft Sees Itself As the Future Third Force in Large Aircraft

      http://www.aviationweek.com/aw/gener...rge%20Aircraft

      Apr 5, 2009

      By Bradley Perrett

      China's newly established Avic Aircraft intends to become the world's third force in making large airplanes, setting itself up for rivalry with compatriot commercial aircraft builder Comac.

      The new company is poised to deeply restructure much of the Chinese aircraft industry, reshaping it in the pattern of Airbus. Old regional entities such as Xi'an and Shaanxi Aircraft are to be swept away, replaced with a framework of units each specializing in its own part of the airframe, such as the wing or nose section.

      The challenges for Avic Aircraft are vast and its ambitions for a leading global position are surely unattainable for many years, if ever. But the planning, at least, suggests that managers are aiming to create a company quite unlike the gaggle of semi-independent Chinese aviation businesses that have so far given major Western airframe makers little competition.

      In terms of products, Avic Aircraft is proposing to build a large military transport and is open to developing a big turboprop airliner that would compete with Comac, outflanking rules intended to prevent the two companies' products from overlapping.

      Details of Avic Aircraft's plans emerged in an interview of company President Hu Xiaofeng with International Aviation, the Chinese partner magazine of Aviation Week & Space Technology. The strategy of sibling company Avic Defense has also appeared in International Aviation (see p. 22 and AW&ST Mar. 30, p. 40).

      Avic Aircraft, provisionally called Transport Aircraft when the industry's reforms were announced last year, defines its role as the integrated design and manufacturing of cargo lifters, propeller passenger aircraft, bombers and specialty aircraft. In other words, its focus is large airplanes, excluding passenger jets.

      In its birth and restructuring, it is trailing Comac, a new Shanghai company to which Beijing has assigned a national monopoly for building complete jet airliners with more than 70 seats.

      While Avic Aircraft is forbidden from building major jetliners, Hu says "in the area of large airliner projects it will play an important role" - meaning that it aims to build major aircraft sections.

      The businesses that are forming Avic Aircraft already make many components for major Western manufacturers such as Airbus and Boeing. They also build major sections for Comac's ARJ21 regional jet and will probably do the same for Comac's forthcoming C919 mainline passenger aircraft (AW&ST Mar. 16, p. 41).

      Avic Aircraft and Avic Defense are just two of a range of specialist aeronautics companies that are being formed from the disparate plants and research institutes of the former Avic 1 and 2, which were merged as Avic last year. Others include rotary-wing specialist Avicopter and another company devoted to general aviation. Avic is the parent of all of the new specialists, but the subsidiaries are supposed to have considerable and increasing autonomy, following the lead of Comac, which is no longer really part of the Avic structure.

      Comac is naturally seen as the company that China hopes will stand alongside Airbus and Boeing in decades to come, but Hu asserts that Avic Aircraft will become the world's third main player in building large aircraft.

      Western executives working with the Chinese industry say, on the one hand, that one should not underestimate the country's determination to establish a first-rank aerospace sector but, on the other, that it still has a long way to go.

      "There is a serious shortage of people with the necessary depth of experience across the industry," says one of those executives. "That experience will come eventually, but it can't come out of thin air.

      "They will need to keep on gathering their strength gradually through a succession of domestic projects and they will want to learn what they can from the work they are doing for foreign manufacturers."

      Those foreign manufacturers, naturally, are not going out of their way to help China learn. Boeing contracts Avic Aircraft units to make parts, but only under so-called build-to-print contracts - following designs that the U.S. company has drawn up outside of China. Airbus is doing development work inside China, but has carefully structured the business to minimize technology transfer (AW&ST Feb. 9, p. 39).

      The units that have gone into Avic Aircraft include Xi'an Aircraft, Shaanxi Aircraft and civil operations of Chengdu and Shenyang, whose military factories have been assigned to Avic Defense. Other facilities include the First Aircraft Institute, a design center. These are famous names in the history of Chinese aircraft building, but nostalgia is not getting in the way of reforms: The separate companies and institutes are to be dissolved, with their resources reallocated by function.

      The First Aircraft Institute, for example, will be combined with the design units at Shaanxi and Xi'an to form Avic Aircraft's unified research and development center.

      Their current shortcomings show why they need to be merged.

      "Those three units have all set up independent design departments for different types of aircraft," says Hu. "But these departments appear to have difficulty in coping with their responsibilities. We must integrate these dispersed resources and make them achieve a greater combined ability than they have now."

      That is a hint at the shortage of skills and experience that the Western executives point to.

      Other Avic Aircraft units will mirror the diverse plants that have traditionally made up the Airbus structure, variously specializing in tails, fuselage sections, etc., and there will also be sales and after-sales service departments.

      "Airbus has already proved that one of the best frameworks for building large aircraft is this one made up of business segments and centers of excellence," says Hu.

      Surprisingly, Avic Aircraft has also been assigned the entire Chinese landing-gear industry, even though another new company under Avic has been set up as the national aircraft systems specialist.

      A key omission from the initial structure is final assembly. That is because Avic Aircraft proposes later to create separate divisions for passenger aircraft, freighters and what it calls special aircraft - which probably include military derivatives for such purposes as airborne early warning. These divisions will own the final assembly lines, while the other units will presumably be their internal suppliers.

      This new structure will not be compromised by having to fit around old programs. Hu says it will handle only new products; the old ones will keep their current arrangements. He can probably afford to adopt that strategy because the company's current aircraft are generally modernized copies of Soviet originals from the 1950s and 1960s and may not have long production lives ahead of them.

      For example, Avic Aircraft builds the MA60 and MA600 propeller airliners, updates of the Antonov An-26, but is moving on to develop the MA700, a 70-seat turboprop of its own design.

      The Beijing-directed division of responsibilities between Comac and Avic Aircraft does not limit the size of the latter's turboprops, however. Hu says his company will "not shirk responsibility" for "all weight classes of propeller airliners" - a clear indication that he would like to build a big propliner.

      There may be a gap in the market for such an aircraft, which becomes more attractive with higher prices for fuel and carbon dioxide emissions.

      Hu says Avic Aircraft is also willing to take on jets with fewer than 70 seats, which it is also allowed to do.

      More immediately, he says that the company must enter the field of large freight aircraft. That is almost certainly a reference to a long-expected Chinese heavy military airlifter, which the company could well already have in secret development. Considering the challenge that Avic Aircraft would face in such a project, and especially in securing advanced and powerful engines, the airlifter may emerge as a derivative of a Russian or Ukrainian design, such as the An-70.

      Avic Aircraft is also working on the Y-9, a greatly improved development of the Shaanxi Y-8, itself a copy of the An-12. China is reportedly getting Ukrainian support for advanced features that will help make the Y-9 a competitor to the Lockheed Martin C-130J, including a redesigned wing.

      Hu does not say whether the Y-9 will be regarded as a new project that will fit into the new corporate structure or as the last of the old products, leaving it mostly at Shaanxi. Nor did he mention further developments of a successor to the H-6 bomber, which is based on the Tupolev Tu-16.

      Like Avic's other new specialist subsidiaries, Avic Aircraft will put itself on to the stock market by transferring its main assets to subsidiaries that are already listed. Those subsidiaries will together become the listed company that takes the business forward. Hu says the future listed company may be called Zhongfei, meaning China Aircraft.
      “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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