As the global aviation industry suffers losses amid the COVID-19 pandemic, China is one of the few countries that presents a clear growth opportunity in the sector. International operators can therefore cash in on growing demand in the country, experts said.
The domestic air travel market is gradually picking up with the epidemic getting under better control in China. The country can now provide some business opportunities for global aviation industrial players given its large market scale and the state of contagion recovery, said Yu Zhanfu, partner and vice-president of consultancy Roland Berger.
British power and propulsion company Rolls-Royce plc recently announced it would lay off at least 9,000 staff out of its 52,000-strong global workforce, which mainly involves jobs in the civil aerospace business. But it has seen signs of recovery in China, and plans to further localize and optimize its supply chain and manufacturing capabilities in the country.
China stands as the third-largest market for Rolls-Royce aircraft engines after the United States and the United Kingdom, and the sales gap between China and UK is fairly small, the company said.
Currently, Rolls-Royce is working through the details of its job reduction plan and business restructuring as it seeks to cope with the downturn in global air travel and declining demand for aircraft engines.
Rolls-Royce said COVID-19 is having a historic impact on the civil aerospace industry. There have been drastic reductions in engine flying hours due to reduced demand and air travel restrictions. It will likely take several years for the global civil aviation industry to return to the levels of activity seen last year.
“For power systems business, we have seen some reduction or postponement of orders, and shortage in supply in some parts of the world, but we are already beginning to see strong and stable recovery, especially in China, where the air travel market is gradually recovering,” said Julian MacCormac, country director of Rolls-Royce in China.
“We remain fully committed to the China market. As the country and its economy start recovering from the pandemic, we will continue to grow our local footprint, develop talent, build new partnerships and explore new opportunities,” MacCormac said.
“We have cultivated an extensive network of suppliers across China that manufactures sophisticated aero engine components and parts. They’re an essential part of our global supply chain,” he added.
As countries worldwide are at different stages of recovery from the pandemic, and the situation varies from one to another, Rolls-Royce said it is staying flexible and taking measures to adapt to the change. It will dramatically reduce its spending this year to strengthen resilience. It is also adjusting capacity to match reduced demand in the civil aviation market.
Meanwhile, China and Russia are jointly developing the long-haul wide-body aircraft CR929. Rolls-Royce and General Electric Co are in the bidding process to become the engine supplier for the new jet.
Currently, Rolls-Royce accounts for about 45 percent of the global engine market for wide-body aircraft, followed by General Electric and United Technologies Corp’s Pratt& Whitney division.
“We are confident that we are best positioned to provide CR929 with the most competitive solution. We expect to intensify cooperation with the Chinese aviation industry by supporting this widebody aircraft program,” MacCormac said.
Yu of Roland Berger said China wouldn’t slow the pace of developing the CR929. Also, the single-aisle C919 that is undergoing flight tests, and the regional jetliner ARJ21 that has been put into use, will provide definite growth opportunities.
Separately, Rolls-Royce said it has a variety of applications ranging from marine, rail, oil and gas to mining, construction and power generation.
“We are a supplier of mission critical backup power for China’s fast-growing telecoms and data industry. Since the COVID-19 outbreak, we have seen significant acceleration of new infrastructure programs in China, especially in the areas of industrial internet, big data centers, 5G and artificial intelligence. It presents tremendous exciting opportunities for technology companies like us,” MacCormac said.
A number of data centers operated by major Chinese technology companies such as Tencent, Alibaba, and Baidu, the telecom industry and financial institutions are equipped with MTU power solutions of Rolls-Royce.
“Rolls-Royce enjoys a big reputation for its aero engines and its other products are less known. Some brands with stronger brand impact in China have taken certain market share. Rolls-Royce needs to actively explore the market, and it requires some time to establish better popularity and recognition for those products,” Yu said.