China has confirmed plans to establish a new company next month to build its next commercial airliner, the 105-seat ARJ21-900. Shareholders will likely include the China Aviation Industry Corp. I (AVIC I), AVIC II, state-owned investment companies and domestic airlines.

The new aircraft will be assembled in Shanghai, with the nose, fuselage and tail sections manufactured in other cities, according to AVIC II vice president Liang Zhenhe. Next month should see the appointment of a director and chief research engineer for the new company.

AVIC I Commercial Aircraft (ACAC) has developed the recently rolled out ARJ21-700 at a cost of $825 million, and is holding talks with Canada’s Bombardier to initiate research to build the bigger version. “Talks with Bombardier are going smoothly, but the final design of the new jet is still under discussion,” said Wang Weiya, head of AVIC I’s civil aviation department.

Meanwhile, preliminary work has also begun on building an 80,000-ton die-hydraulic press forge in Deyang, in Sichuan province, which will cost $205 million. All of China’s existing press forges are of less than 40,000 tons capacity and therefore not fit for making key parts of large airplanes.

In December, Chinese Premier Wen Jiabao visited the AVIC I factory, which is building the ARJ21, and gave a speech emphasizing the priority that the government is now giving to the manufacture of large jetliners. According to Gu Huizhong, deputy general manager of AVIC I, the government plans to merge AVIC I and AVIC II to better equip them for the task. Both companies have experience supplying components to Boeing and Airbus.

ACAC has scheduled first flight of ARJ21-700–called Xiang Feng (Flying Phoenix) in Chinese–for next month. The company has received 171 orders for the 2,000-nm-range aircraft, including two from Lao Airlines and several from leasing companies. It plans to deliver the first aircraft to domestic launch customer Shandong Airlines in September 2009. “The ARJ21 makes us part of the global aviation industry but it still faces a new journey to become successful financially,” said general manager Lin Zuoming.

Although it has yet to secure a Western customer, ACAC plans to certify the airplane to international standards with the help of U.S. Federal Aviation Administration’s office in Shanghai. ACAC deputy chief designer Chen Yong said the aircraft will go through more than 170 tests before it gets the certification.

The ARJ21 cabin is 123 inches wide, which is 15 to 25 inches wider than Bombardier’s CRJ700 and CRJ900 jets, and Embraer’s 170 and 190 models. The seat is almost an inch wider than that of the Boeing 737. “It’s one of the amplest cabins of any regional plane in the world,” said Chen. “We aim to provide regional air passengers with the service comparable to trunk line airplanes.”

Liu Daxiang, a vice president for AVIC I, said China has set a target of completing designs for a large aircraft by 2010, with production starting by 2020, which will help the country secure market share from foreign aircraft makers.

China believes that developing a large aircraft will help it to master core technologies and reduce its dependence on foreign technology. Some 40 percent of the ARJ21’s components came from overseas, including its General Electric CF34-10A turbofans and Rockwell Collins Pro Line avionics. AVIC I plans to begin mass production in 2009 and expects to realize an annual output of 30 ARJ21s within two years. At present, China uses foreign-made Boeing, Airbus, Bombardier and Embraer models on its domestic airline routes.

The Chinese believe the ARJ21 can take up to 60 percent of the domestic market for mid-size regional airliners over the next 20 years. Official forecasts predict a need for at least another 800 to 1,000 regional jets by the year 2020.

Bombardier Counts On Chinese Connection

Bombardier’s involvement in China’s ARJ21-900 program would result in Avic I becoming a risk-sharing partner in its own proposed C Series airliner, due for industrial launch some time this year. The Canadian airframer’s schedule calls for first delivery of the C Series in 2013, while AVIC I has set its sights on 2012 for service entry of the ARJ21-900.

Although a memorandum of understanding signed between Bombardier and AVIC I during last year’s Paris Air Show centers on the ARJ21-900 and C Series, the final agreement would cover any number of projects associated with the 90- to 149-seat market segment. Apart from Bombardier’s engineering help, the MOU calls for the Canadian company to contribute $100 million in plant and equipment investment related to the ARJ21-900, while AVIC I unit Shanghai Aircraft Co. gains status as the Tier 1 supplier of the C Series’ aluminum lithium and composite fuselage.

Bombardier has sent some engineers to work in Shanghai with engineers employed by AVIC I on the ARJ21-900. Now in the so-called joint technical assessment phase, the program will move into the more advanced joint concept definition phase over the next few months, at which point Bombardier would begin sending more people to join in engineering work.