GE $3 Billion Deal to Supply ARJ21 Regional Jet Engines

November 10th 2002 (FriedlNet.com) - Continuing its almost 100 year legacy on the Chinese mainland, General Electric this week signed a cooperative letter of intent with the China Aviation Industry Corp. to supply a new version of its best-selling jet engine model CF-34 to power 500 ARJ21 regional jets in the Middle Kingdom during the next 20 years, a deal worth $3 billion to the Connecticut-based jet-engine maker.

The new CF34-10A engine was chosen to power both the 79-passenger and 99-passenger regional ARJ21 aircraft, the former scheduled to commence passenger service in 2007. The deal was struck between GE Aircraft Engines (GEAE) and the Chinese subsidiary of the mother SOE, AVIC I Commercial Aircraft Co. Ltd. (ACAC). The regional ARJ21 model is still in the development stage, being specially designed to suit the flying environment over the vast expanse of Chinese terrain, specifically the hot temperature and high altitude conditions characteristic of Western flying routes.

The engine selection comes as many global players in the aviation industry expect Chinese demand for future aircraft to increase dramatically, fueled by remarkable economic growth rates almost going double-digit. One of the world’s largest plane makers, Chicago-based Boeing Co., earlier this week released its 2002 China Current Market Outlook at the Zhuhai Air Show in southern China, expecting China to buy nearly 2,000 new aircraft during the next 20 years, worth a total of $165 billion. About 80% of these will be used to expand the domestic fleet of currently roughly 605 passenger planes. The company expects the annual growth rate of the aviation transport industry for intra-China flights to grow 9% a year, compared with China to northeast Asia growth rates of 7.1%, China to North America growth rates of annually 6.1%, China to Europe growing by 5.4%. Especially intra-China growth will be spurred, fuelled by the construction of a widespread transportation network, supporting feeder traffic for international hubs such as Hong Kong. There are currently 50 new airports scheduled for construction in China over the next 5 years. ACAC estimates regional aircraft will make up about 31% of the nation’s fleet by 2021, up from 16% now. By 2021, it is also expected that China overtake Japan as the world’s second largest aviation market.

Other players on the global market for regional aircraft are Canada’s Bombardier and Brazil’s Embraer, with Fairchild Dornier having gone belly up earlier this year.

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