HONG KONG — China, poised to become the world's biggest buyer of new planes, also wants to build a graveyard for old aircraft.
China Aircraft Leasing
Group Holdings is investing $2 billion to build the country's largest
plane disassembly plant in Harbin — known as China's "Ice City" — some
750 miles northeast of Beijing. The facility starts operation in 2017
and aims to tear apart 50 jets annually after five years, Chief
Executive Officer Mike Poon said at a press conference in Hong Kong Dec.
18.
"The headlines for
aircraft in Asia are about new deliveries, but there will be significant
retirement of old aircraft," said Will Horton, a Hong Kong-based
analyst at the CAPA Centre for Aviation. "You need a robust system to
catalog the parts to sell them in foreign markets."
China's foray into the
field comes as Boeing, the world's largest plane maker, also is
exploring ways to wring money from the end of a jetliner's life. With
the value of parts potentially outweighing an old jet's resale price,
the $3.2 billion a year market for used aircraft parts is growing as
companies discard planes well before the end of their 30-year life
cycles.
The scrap-aircraft
industry is concentrated mainly in the United States, a mix of closely
held operators such as Aircraft Demolition — which works out of
Arizona's Pinal Airpark, known for its open-air storage ) and publicly
traded companies like AAR Corp.
Some 48 percent of all
aircraft deliveries in the past five years were to replace aging planes,
compared with the historical average of 43 percent, said China Aircraft
Leasing, also known as CALC, citing data from Ascend Flight Global
Consultancy. In April, the Washington-based Aircraft Fleet Recycling
Association said as many as 1,800 aircraft will be dismantled around the
world in the next three years, citing industry operators.
From leasing, sale and
leaseback to disassembly services, CALC is committed to becoming a
one-stop, full life cycle aircraft solutions provider, the company said
in a statement Thursday.
Typically, deserts are
seen as ideal spots for disassembly, since the dry conditions reduce
corrosion. More than 60 companies are based out of Mojave Air &
Space Port in California, one of the world's leading centers for flight
testing, space technology and jet maintenance and storage.
In contrast, Harbin is
known for its bitterly cold winters and annual ice sculpture festival.
The city, which is also the capital of Heilongjiang province, is the
heart of China's industrial northeast.
"It would be interesting
to see what the exact plans are and how they plan to accommodate
Harbin's long and cold winters," CAPA's Horton said. "Disassembly is
normally done outdoors."
CALC's Poon said that the
plant's operational model will not require as much storage space as
those elsewhere. The plant will be located near the Harbin Taiping
International Airport. Harbin was chosen because the city has an
existing aerospace industrial presence.
The sector is in its
infancy in China, with the first disassembly carried out just last year
by GA Innovation China, according to a statement on the company's
website. The company is a venture between GA Telesis LLC and Air China
Ltd.
CALC's proposed facility
is part of a broader plan to revive China's northeast. Brazilian
aircraft manufacturer Embraer has an assembly facility in Harbin, a
joint venture with Aviation Industry Corp. of China.
China is expected to be a
driving force in the aviation industry in coming years. The country
will need about 5,300 new planes, valued at $820 billion, by 2033,
Airbus Group NV said Dec. 10. That represents 17 percent of global
demand for new planes in the next 20 years.
Earlier this year, Boeing
forecast that more than 6,000 of its planes will go to China through
2033, about 40 percent of the company's Asian deliveries. Last month,
CALC placed a $10.2 billion order for 100 Airbus single-aisle A320
planes.
"With the prompt
development of China's aviation industry and the rapid expansion of
airlines' fleet, the number of old retiring aircraft has been increasing
every year," CALC said in a Dec. 4 statement.
Potential regulatory
hurdles to CALC's plan remain. It's unclear whether the current practice
in China to restrict imports of jetliners more than 10 years old, and
air freighters above 15 years old, would apply to planes brought there
just to be taken apart, Dennis Lau, an aviation analyst with Ascend,
said in a telephone interview.
Four calls to the Civil
Aviation Administration of China were not answered. CALC's Poon said the
plant will initially focus on the China market and the company is in
talks with the local government on possible policy changes.
"It makes sense for them
to start something like this, since China has not been exporting its old
planes in a big way," said Dewey Yee, chairman of Future Gate Finance, a
Hong Kong-based air-financing consultancy. "Some of the planes being
discarded are not even that old, so the parts have a pretty high resale
value."
- Source: http://www.chicagotribune.com
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