China forms company to make regional and jumbo jets

By Kirby Chien

BEIJING (Reuters) - China has established a company to build regional commercial jets, with an eye to eventually reducing the country's reliance on Boeing (BA.N) and Airbus (EAD.DE) for jumbo jets, official media said on Sunday.

Commercial Aircraft Corp of China is capitalised at 19 billion yuan (1.39 billion pounds), with 6 billion yuan coming from the state-owned Assets Supervision and Administration Commission, giving it the single largest stake at 30 percent, Xinhua said.

A consortium made up of the municipal government of Shanghai -- where the ARJ21 regional jet is being developed -- and China's two state aircraft makers, AVIC I and AVIC II, will have a 25 percent share for 5 billion yuan, it said.

The 90-seat ARJ21-700 was unveiled late last year, China's first domestically developed regional jet which will be test flown later this year and is scheduled to begin deliveries sometime late next year.

But many analysts have expressed scepticism about the commercial prospects of a large jet designed and manufactured entirely in China, given the country's limited experience in big aircraft.

"They might be able to establish a presence in the business over the next 10 to 20 years," said Richard Aboulafia, an aviation analyst with Teal Group, while adding a key caveat.

"If they nurture it with government seed cash, and gradually offer shares to the private sector," he added.

The new company's general manager, Jin Zhuanglong, gave no timetable for making larger aircraft, and said investment and cooperation were not limited to domestic companies.