Recruiting in China

Airbus signed a framework agreement with the Chinese authorities on Thursday to build its first aircraft assembly plant outside Europe, at Tianjin in eastern China.

It also agreed a preliminary deal for its biggest single order from China, for 170 aircraft, which could eventually be worth about $14bn (€11bn) at list prices, before heavy discounts.

Airbus, a subsidiary of EADS, Europe's leading aerospace and defence group, is seeking to extend its industrial operations beyond its European base in France, Germany, Spain and the UK, and has made China a priority target both for increased sales and industrial co-operation.

It has failed to make much progress in breaking into the Japanese market, where Boeing, its US rival, has an entrenched position both in sales and as an industrial partner, and the European group is seeking to develop a counterweight presence in China.

Thursday's deals provided a temporary respite for EADS and Airbus from the prolonged crisis triggered by mounting industrial and management problems, including the costly two-year delays in early deliveries of the A380 superjumbo and a recent €4.8bn profits warning.

Airbus said it had signed a framework agreement to assemble its successful A320 family of single-aisle, short-haul jets at a plant in the coastal city of Tianjin, east of Beijing. The plant is expected to be located in the huge Binhai development zone, which China's government expects to rival manufacturing centres such as Shanghai and parts of the southern Pearl River delta.

Airbus said it would begin assembling aircraft in China in early 2009 with the aim of increasing production to four a month by 2011.

Louis Gallois, co-chief executive of EADS and chief executive of Airbus, said the aircraft sections for the A320 would continue to be produced in Europe but would be shipped to Tianjin for final assembly.

The Chinese consortium involved in establishing the plant will be led by the Tianjin Free Trade Zone and will include China Aviation Industry Corporation I (Avic I) and China Aviation Industry Corporation II (Avic II).

Olivier Andries, Airbus executive vice-president strategy, said Airbus would hold a 51 per cent stake in the joint venture and would appoint the general manager. It would invest €100m-€150m. "The main rationale in starting assembly is to build our presence in the Chinese market," he said.

The deal was signed during a visit to Beijing by French President Jacques Chirac, France's president, and still needs formal approval by the EADS board and Beijing.

It was supported by a general terms agreement for China to buy 150 A320 aircraft. Beijing also backed Airbus plans to develop the A350XWB, a new family of long-range, medium-capacity jets, by signing a letter of intent for 20 aircraft.

Separately Airbus said it had signed a firm contract for the purchase of 65 Airbus A319 aircraft with Skybus, a US lowcost, startup airline based in Columbus, Ohio. The airline is aiming to start operations in early 2007.