Friday, March 23, 2012

Cessna, AVIC Sign Agreements On General Aviation Joint Ventures

-- Cessna plans to establish business jet JV with AVIC subsidiary

-- JV would produce two models for Chinese market

-- New jointly developed jet under discussion could be sold globally

By Andrew Galbraith


SHANGHAI (Dow Jones)--Wichita, Kansas-based Cessna Aircraft Company on Friday announced it plans to establish a new joint venture to build its business jets in China, in a move that illustrates the growing appeal of China's aviation market to aircraft companies struggling through a global downturn.

In a statement, Cessna said it was entering into negotiations to establish a business-jet joint venture in Chengdu, the capital of China's Sichuan province, following the signing of a cooperation agreement with AVIC Aviation Techniques Co., a subsidiary of state-owned Aviation Industry Corp. of China, and the Chengdu government.

AVIC and Cessna, a subsidiary of Textron Inc. (TXT), also inked a separate agreement that Cessna says will lead to further joint ventures around the development of general aviation in China, including a new aircraft service network.

A Cessna spokesman said the company hoped to produce two midsized aircraft models for the Chinese market through the Chengdu venture, including the company's forthcoming Citation Latitude business jet. Cessna and AVIC Aviation Techniques are also "discussing the potential to jointly create a new business jet" that could be sold internationally, he said.

Cessna says it hopes to launch its joint ventures to implement "the initial phase" of the agreements within the next year.

A joint venture with China could place Cessna in a position to benefit from development of the country's nascent private aviation market at a time when demand for corporate jets remains weak worldwide.

France's Daussault Aviation SA (AM.FR) said this week that it saw little chance of a recovery in the North American corporate jet market in 2012 after weak sales contributed to a 36% fall in the company's operating profit to EUR376.5 million last year. The company said it expected stronger demand in China and Latin America to bolster sales before a broader market recovery in 2013.

China presents a particularly choice prize for aircraft makers as the country gradually relaxes strict aviation rules that reflect the military's control of the nation's airspace. A document released this week by the State Council, China's cabinet, highlighted the need to "expand and improve" civil aviation networks during the period of the 12th Five-Year Plan, which ends in 2015.

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