Aviation Industry Corporation of China: Company Strategy & Performance Analysis
Aviation Industry Corporation of China (AVIC) is an aviation company. It undertakes the development of aircraft, aviation weaponry and equipment. It provides various services such as aircraft leasing, general aviation, transportation, medical, planning and construction services. AVIC integrates aviation science and technology to produce engines, components and spare parts; and develops electromechanical parts such as gas turbines, refrigeration equipment, electric products, environmental protection equipment, and energy equipment. COMAC operates as a major business subsidiary for Aviation Industry Corporation of China (AVIC) in executing massive passenger programs in China.
The company engages in thr planning, development and implementation of civil aircraft, domestic jet programs and trunk liners in China. It also conducts research, manufacturing and flight tests for civil aircraft. It provides aircraft servicing, leasing and marketing services.
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The company witnessed a significant number of orders for its introductory aircraft such as the ARJ21 and C919. As of 2017, the company secured 158 orders for the ARJ21 regional jet from 9 customers and 282 orders for C919 commercial aircraft from 13 customers. The new product enhancements have driven the demand for these aircrafts. For instance, the COMAC ARJ21-700/900, large regional jets are available in extended (-ER) and standard variants, and are specially designed with winglets and GE’s CF34-10 engine. Depending on preference these aircraft can have 78 or 98 second class standard seats, and 90 or 105 first class standard seats.
The debut of the ARJ21 aircraft segment was a breakthrough in the Commercial Aviation market in China in 2014. The COMAC C919, a medium narrow body commercial aircraft, was introduced to break the monopoly of large aircraft manufacturing companies in the Chinese Aviation market. The new addition to the C919 line will feature CFM’s new Leap-IC engines and have 156 second class standard seats and around 174 first class seats.
Significant increase in contracts for aircraft drive revenues
The company witnessed an increase in revenue in 2016, which is mainly attributed to strong performance of its Aviation Parts and Components segment and increased orders for aircraft. The company’s revenues increased 0.6% from US$5,527.7 million in 2015 to US$5,562.9 million in 2016. Through its subsidiary, COMAC, the company aims at improving its foothold in the Global Civil Aviation market by securing various contracts. In November, 2016, COMAC signed a partnership agreement with Boeing to improve the fuel efficiency of aircraft. Through the deal, both the companies will focus on leveraging technological integrations to improve the efficiency of aircraft thereby expanding the Aircraft business. Further, the deal would provide long term sustainable growth in the Global Aviation market. COMAC also looks to invest in Bombardier’s passenger jet programme and collaborate with its commercial aerospace unit to launch the C-Series (150 standard seating) with the latest technology.
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