Apr. 8 (NBD) -- Chinese aircraft and aero engine parts manufacturer Future Aerospace has entered into a supply agreement with Safran, French supplier of system and equipment in the aerospace markets, according to a filing released by Xinjiang Machinery Research Institute Wednesday, the parent company of the former.
Under the agreement, Future Aerospace is to provide aerocraft parts and components of 3 categories and 63 subgroups for Safran and the first batch of orders is worth around 89.73 million U.S. dollars. Future Aerospace is expected to deliver 1.29 million-U.S.-dollar products in 2018, and 16 million to 18.7 million U.S. dollars worth of products each year from 2019 to 2023.
The same filing also revealed that those parts and components are subject to a first article inspection and stability tests in limited quantities before they go in mass production.
Wu Yang, deputy manager of Xinjiang Machinery Research Institute, said most of the company's revenue comes from military products, but military products only take up a small portion of the global aerospace market. As the civil aviation market has long been dominated by big names such as GE, Rolls-Royce and Safran, the supply agreement with Safran would be an important step for the Shenzhen-listed company to explore opportunities in civil aviation.
It is noteworthy that Safran Nacelles, a subsidiary of Safran, is a major engine supplier for Airbus A320 and A330. In some sense, Xinjiang Machinery Research Institute can be considered as an indirect supplier for Airbus.
The aerospace industry involves many other sectors such as telecommunication, machinery manufacturing, and new material. In addition, it is also technology-and money-intensive. That's why many civilian planes are developed through international cooperation with subcontracting as a major form.
In fact, several domestic aviation companies have started to take subcontracting businesses. China National Aero-Technology Import & Export Corporation (CATIC), Shenyang Aircraft Corporation, AVIC Chengdu Aircraft Industrial (Group) Co., Ltd, and AVIC Xi'an Aircraft Industry (Group) Company Ltd have signed 3 subcontracting agreements with Airbus, manufacturing A320 parts and components.
In 2016, a fully-owned subsidiary of AECC Aviation Power Co., Ltd, invested 1 billion yuan (159.92 million U.S. dollars) to undertake subcontracting contracts. Once the project, located in Xi'an reaches its designed capacity, it can produce 106,000 engine parts, generating an output of 1.2 billion yuan (190.70 million U.S. dollars) annually.
Subcontracting business in the aerospace industry has a huge market potential, which is likely to create a market value of 3 billion U.S. dollars, Wu noted.
Li Xiaojin, an industry expert, told NBD that Xinjiang Machinery Research Institute's cooperation with Safran can offer the latter better products and services at lower cost.