Company gains ground on rival Boeing in race to dominate market
When Peter Tiarks made his first trip to China nearly 30 years ago onboard the first ever Airbus aircraft demonstration tour to the country, Boeing aircraft dominated the Chinese skies.
Airbus SAS sold its first aircraft, an A310, to China two years later in 1985. Boeing Co had a 13-year head start.
But now Airbus is delivering two aircraft to China on average each week, and it controls 49 percent of the Chinese market for planes with more than 100 seats.
The question of how to serve the ever-increasing Airbus fleet in China - now with around 850 jets - tops the agenda for Tiarks, Airbus China vice-president for customer services.
Tiarks' answer to that challenge is to go beyond ensuring the quality and efficiency of basic support, and offer value-added services to help airlines improve their operations.
As oil prices surge to record-high levels, the European aircraft manufacturer believes it can help airlines save costs not only by building more fuel-efficient planes, but also through customer services, which meet the airlines' need for cost-effective outsourcing options, and help save costs in areas such as logistics, flight operations and engineering processes.
"The idea is that we take certain parts of the airlines' responsibilities, such as maintenance or engineering. We call it `tailored support packages'," Tiarks said.
"We are well on track with the deployment of such services in China due to the open and innovative attitude of the Chinese airlines. Our intent is to deploy more and more enhanced services in China," he said.
The strategy is an essential part of an objective set by the EADS Group, Airbus' parent company, to generate 25 percent of its business revenue through services by 2020.
The European aerospace and defense conglomerate plans to have about 80 billion euros ($103.40 billion) in revenue by 2020, with 25 percent of the revenue expected to come from the high-value services.
Currently, services represent about 10 percent of the company's total revenues, which stood at 49 billion euros in 2011.
"We are well on track and, in fact, it's even possible to achieve the target ahead of schedule in China," Tiarks said.
Tiarks' confidence mainly comes from the fast-growing Airbus fleet in China. More than 100 Airbus planes are now delivered to China every year, which means that about 20 percent of the company's global production goes to China.
And that is thought to be just the beginning. As the world's fastest-growing commercial aviation market, China will need 5,260 new commercial aircraft, valued at $670 billion, over the next 20 years, Boeing said in its annual market outlook in September.
China is the world's second-largest market for domestic air traffic and the seventh largest for international passenger air traffic, according to the International Air Transport Association.
Flight hour services and spare parts logistics services are two packages well accepted by Chinese airlines, Tiarks said.
Flight hour services range from the supply of material and repairs to full maintenance.China Southern Airlines Co Ltd signed a contract with Airbus for customized flight hour services for its fleet of five A380s in April 2011.
Airbus later signed similar agreements with Sichuan Airlines Co Ltd for its A330 fleet, and with Yangtze River Express Airlines Co Ltd for its A330 freighter fleet.
Airbus also started a door-to-door customized spare parts logistics service in China in 2008.
Using DHL as a forwarder for shipments, Airbus provides spare-parts deliveries and takes full control of the supply chain for customers.
The service is designed to reduce logistical complexity and administration workload for customers, enabling them to concentrate on their core business.
Seven Chinese aircraft maintenance, repair and overhaul, or MRO, companies signed up for the service.
The companies include Guangzhou Aircraft Maintenance Engineering Co Ltd, the MRO arm of China Southern Airlines, and Shanghai Technologies Aerospace Co Ltd, the maintenance provider for China Eastern Airlines.
Airbus' US archrival Boeing also offers value-added services to Chinese airlines.
For instance, Air China has signed a contract with Boeing for an aircraft health management service for a total of 117 Boeing 737 planes. The service allows Air China to gather and evaluate real-time in-flight flying-conditions data. The data allow the airline to better plan and perform repairs.
Airbus recently added a new A320 full-flight simulator to its training joint venture Hua-Ou Aviation Training Center in Beijing.
The 12,300-square-meter training center is now equipped with four full-flight simulators, three for the A320 family and one for the A330/A340 family.
Boeing's training center in Shanghai has three simulators.
The new simulator can also be upgraded to support flight training for the new A320neo plane.
ICBC Financial Leasing Co Ltd - the leasing arm of the Industrial and Commercial Bank of China Ltd - has ordered 20 A320neo aircraft. The new plane, a revamped A320 with new engines, is scheduled to enter service in 2015.
Compared with China's huge demand for pilots, the training capacity at the Hua-Ou center is still limited.
Boeing forecast that China will need about 72,700 pilots to operate the 5,000 new planes entering service in the next two decades.
The country now has more than 20,000 pilots, operating a fleet of about 1,800 aircraft.
China's pilot training capacity can hardly catch up with the fast-growing aviation market, said Zhu Qingyu, director of the marketing department of the China Air Transport Association.
"Our mission in China is to secure the entering-into-service of new operators and to teach the Airbus way to Chinese customers," said Thierry Marty, senior director at Hua-Ou.
Like the Airbus' training centers in other countries, the Hua-Ou center is receiving more and more young and inexperienced pilots, Marty said.
"They lack experience and just graduated from schools like the Civil Aviation Flight University of China. We have to adapt to that," Marty said.
Hua-Ou is now offering more entry-level training services.
"We have to get them ready at the right moment with the right skills," Marty said.