McDonnell Douglas Corp., the U.S. aircraft manufacturer, has announced the sale of two MD-80 twin-jet transport planes to China's civil aviation authority and airline, the Civil Aviation Administration of China, one week after disclosing a joint program with the Shanghai Aviation Industrial Corp. to develop a new propulsion system on future aircraft.
The announcement by McDonnell Douglas China Inc. President Gareth Chang marks the latest round in a heated competition between McDonnell Douglas and its chief U.S. rival, Boeing Co., for the booming aircraft market created by China's plans to decentralize its airline operations into separate regional operations.
In May, Boeing sold the Chinese aviation administration eight aircraft, valued at a total of $350 million.
Chang said China's decentralization has sent foreign aircraft salesmen scurrying all over the mainland "to see what people want."
McDonnell's latest sale brings the total number of MD-80s purchased by China to 30, at an estimated price of nearly $1 billion. In December 1983, China purchased two MD-80s and in April this year agreed to buy 26 more, of which all but one will be partly assembled in Shanghai. The coproduction agreement was the first of its kind with the Chinese, and according to Chang, the largest single business transaction to date between the United States and China.
Last year, Chinese officials announced the establishment of four new regional airlines out of the existing operations, plus one helicopter company. Chang reported plans for six offshoots and six independents. The aviation administration will divide its domestic routes between Air China (Peking), Eastern Airlines (Shanghai,) Southern Airlines (Guangdong,) Southwestern Airlines (Chengdu,) Northwestern Airlines (Urumqi,) and the China General Aviation Co., handling special operations such as filming, aerial surveys, and government charters, he said.
The aviation administration will remain as a regulatory body, and control the new airlines by retaining licensing and pilot certification rights. The administration also will retain the right to approve regional airline purchases, although the new airlines will be responsible for raising their own financing, training programs and competitive marketing against rival services on the same routes. They will be expected to recruit their own personnel, Chang said.
Among the problems, Chang said, will be arguments over who will sell whose tickets, who will own the regional airports, and how maintenance costs will be charged to the different carriers.
In May, the director general of the aviation administration, Hu Yizhou, told journalists he was working 15 to 16 hours a day to overhaul the troubled civil aviation system, which is known throughout Asia for surly service, poor safety standards and unreliable reservation procedures and flight scheduling. "Our staff are so pressed now they may not have time to smile or be polite," he said at that time. He predicted then that even with a planned expenditure of $1 billion in 1986, the aviation administration will not meet growing demand, which increased by 40 percent in 1984 over the previous year.