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20 Oct 03. EADS will subscribe for five percent of the issued shares of the Chinese aviation and automotive manufacturer AviChina Industry & Technology Company Limited in the current IPO on the Hong Kong Stock Exchange. The value of this investment will be up to €30m depending on the final IPO pricing.

This announcement is the first practical result following last Friday’s “Strategic Cooperation Agreement” between EADS and AviChina in Hong Kong. EADS and AviChina will cooperate in the development, manufacturing and upgrade of aviation products, including helicopters, regional aircraft and trainers. At the time China is opening the capital of its aerospace industry to foreign investors, EADS becomes a strategic partner.

“We are pleased to intensify the cooperation with our Chinese industrial partners and to contribute to the successful IPO of AviChina”, EADS CEOs Philippe Camus and Rainer Hertrich said. “AviChina will be a strong partner in long-term projects and joint ventures. Almost three decades of successful Sino-European cooperation especially in the field of helicopters have paved the way for this strategic cooperation to be established. The agreement will allow us to reach a new level and quality in the long-standing relationship between Chinese industry and EADS.”

AviChina, with RMB 11.3 Billion (about € 1.2bn) of revenues generated in 2002 and a RMB 843 Million (about € 90 million operating profit) is a spin-off of the China Aviation Industry Corporation II (AVIC II). It is the leading Chinese company for helicopters, regional and general aviation aircraft, trainers and UAVs. The “Strategic Cooperation Agreement” gives EADS the right to appoint a non-executive director to AviChina’s board.

EADS and AviChina parent AVIC II have been cooperating for decades in different programmes. Eurocopter, the global number one in the helicopter market, has established long lasting cooperation relationships in the civil helicopter field. This cooperation includes the EC120, a light single engine helicopter jointly developed and produced by Eurocopter, AviChina and Singapore Aerospace. Only a month ago, EADS subsidiary Eurocopter signed a “Teaming Framework Agreement” with AviChina parent AVIC II extending the scope of cooperation between the two groups.

China is expected to become the world’s largest aviation market after the US. The Chinese economy is experiencing annual growth rates of eight percent, which lead to an outstanding growth potential for commercial aircraft, helicopters and other aerospace products and services. In the helicopter sector alone, EADS envisages a market potential of € 500 million in the next ten years. Within the commercial aircraft market, Airbus forecasts a market volume of around 800 units over the next decade, of which the EADS subsidiary is set to capture approximately 50 percent.

EADS generated revenues worth approximately € 0.5bn from China in 2002 and sees strong prospects for growth.

“For EADS, a long-term strategy of industrial presence in fast-growing markets such as China is key to its international business development”, Camus and Hertrich said.

The strategic partnership will also strengthen AviChina’s business opportunities, with EADS offering its significant worldwide experience and capabilities in the aerospace sector. The mutual goal is to establish cutting-edge technology in China that will allow the highly competitive manufacture of helicopters locally and the development of upgrade capabilities for existing aircraft within a short time-frame. The partners envisage further extending their industrial collaboration through joint operations, the setting-up of joint venture companies and participation in joint programmes.

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