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China Eastern, UTC arm set up Shanghai JV

By Wang Ying (China Daily)
Updated: 2009-09-25 08:29

China Eastern Airlines has set up an aircraft engine maintenance joint venture in Shanghai with the Chinese unit of United Technologies Corporation (UTC).

The engine maintenance plant in Minhang district is expected to lower maintenance costs for carriers, said company officials yesterday.

Work on the new unit called Shanghai Pratt & Whitney Aircraft Engine Maintenance Co Ltd began in 2007. The unit is spread over an area of 25,555 sq m, or equivalent to about five standard US football fields.

According to the contract signed between the two firms, China Eastern will hold a 51-percent stake in the venture, with the balance 49 percent to be held by the UTC unit.

Li Yangmin, vice-president, China Eastern, told China Daily that the new joint venture involves a total investment of $98 million. Incidentally Li is also the chairman of the new engine maintenance shop.

"During the first two years, the workshop would be capable of overhauling 100 engines every year. After 2010, we expect to handle 300 engines annually, worth 3 billion yuan by revenue," said Li.

According to Li, half of the maintenance business will come directly from China Eastern. It deals mainly with CFM56 engines, or engines used in Airbus 320 and Boeing 737 aircraft. China Eastern is currently the largest consumer of CFM56 engines in the Asia-Pacific region.

"The plant will cut carrier's maintenance costs by more than $500,000 for each engine, even after deducting the taxation and cost of transportation, raw material and labor," he said.

By using state-of-art technology that makes the entire overhauling process more cost-efficient and greener, the new facility is able to reduce costs significantly.

Related readings:  Air China's parent may sell $61m stake in China Eastern  China Eastern returns to black in first half  China Eastern to merge with Shanghai Airlines  China Eastern merger plan may be released next week

Li said nearly 3 percent of the facility's energy requirements would be met by on-site renewable sources like solar thermal, solar electric and wind power. In addition, construction materials used would include 30 percent recycled content.

Since launching its joint venture in China in 1996, Pratt & Whitney has been actively seeking business expansion in this region. Todd Kallman, president of Pratt & Whitney Commercial Engines and Global Services, said the company had expressed its interest to be a supplier for Commercial Aircraft Corporation of China (COMAC).

China Eastern Airlines is one of the major three domestic airliners with a fleet of more than 240 aircraft. In July, the Shanghai-based carrier said it was undertaking a restructuring with its local rival Shanghai Airlines, and analysts commented the tie-up would consolidate its market share in Shanghai.

UTC is a US multinational conglomerate based in Connecticut. In 1934, the corporation broke up into three independent companies, Boeing, United Aircraft and United Airlines. United Aircraft changed its name to United Technologies in 1975.