French President Emmanuel Macron this week gave a horse to Chinese President Xi Jinping (習近平), but handing over the Airbus A380 has proved more difficult.
The visit started with talk about Airbus SE offering China a production role on its superjumbo aircraft to secure a program-extending order for the slow-selling jet.
While discussions were held on sales of the A380, according to Macron, there is no sign yet of any new orders or industrial deal for the double-decker plane.
There was a time when China taking a production role on the A380, a symbol of European industrial cooperation and technological accomplishment, would have been unthinkable. Times have changed.
Offering China what amounts to largely cosmetic work on the A380 — things like the cabin equipment and paint job would be added locally — would be a small price to pay to rescue the program, which risks being shut down due to a dearth of fresh orders.
If China can be persuaded to accept in the coming weeks or months, in return for purchasing more of the aircraft, Airbus should seize a much-needed helping hand.
There is no guarantee that China will offer one, though.
On paper at least, the A380 is well-suited for the Chinese market.
The world’s most populous country has congested skies and airports, which frequently leads to long delays. And air traffic there is poised to increase, a lot.
Cramming as many people as possible onto a plane might therefore make sense on particularly busy routes.
Airbus thinks that cities like Shanghai, Beijing and Guangzhou are candidates to become “super-hubs,” which would also suit the A380 business case.
That is the theory, but the A380 has been a lesson in how business plans that look good on paper can disappoint in reality. So far China has only purchased five superjumbos and operator China Southern Airlines Co (中國南方航空) has at times struggled to find ways to use them profitably.
So, any discussions with Airbus will probably focus on what China gets in return.
Until now Airbus and rival Boeing Co have been allowed to tap the Chinese market without establishing large-scale local manufacturing or transferring lots of technology — in contrast to the car industry, in which foreign automakers have established much bigger joint ventures.
True, Airbus in 2008 set up a final assembly plant for the A320 in Tianjin, but it produces only four aircraft a month, or less than one-10th of global production of that model. This is being ramped up to six a month. Boeing is only now setting up a finishing plant for its 737 in China.
This comparatively modest local investment partly reflected a power imbalance: China’s need for aircraft to serve its rising middle class was greater than manufacturers’ need to sell planes there.
China’s aircraft builder, the Commercial Aircraft Corp of China (中國商飛), has won hundreds of orders for its C919 single-aisle jet, but is still a way off challenging the Boeing and Airbus duopoly.
China holds a stronger hand today. Overall, Chinese deliveries account for almost one quarter of Airbus’ aircraft production. Though it will need thousands more new planes in coming decades, China does not necessarily need A380s.
“For aviation, China isn’t a cheap or stupid market to peddle unwanted goods,” Will Horton at CAPA Centre for Aviation said. “If A380 sales were up to Chinese airlines, they wouldn’t buy it — but of course orders are political.”
With Airbus running out of options for the A380, expect the Chinese to hold the whip-hand.
Chris Bryant is a Bloomberg Gadfly columnist covering industrial companies. He previously worked for the Financial Times.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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