AVIC unit buys German aircraft engine builder

AVIC International Holding Corp has acquired the diesel aircraft engine and manufacturing assets of Thielert Aircraft Engines GmbH, the subsidiary of Aviation Industry Corp of China said on Tuesday in Saxony, Germany.

It did not disclose the cost of the transaction. Both the Chinese and German governments have approved the acquisition, AVIC International said.

The new assets are being added to the Continental Motors Group, the global main piston aircraft engine builder for small aircraft in the United States, which was purchased by AVIC International for $186 million in 2011.

Through these acquisitions, AVIC International has become the world's only supplier of the full family of gasoline and kerosene piston aircraft engines.

Thielert is a global provider of kerosene piston aircraft engines for general aviation, which went under due to financial problems in April 2008. Its business has since been run and restructured by a government-appointed insolvency administrator.

The German manufacturer had two available product lines, the Centurion 2.0 and Centurion 4.0 series. The Centurion brand will be retained after the acquisition.

"Kerosene piston aircraft engines can resolve the shortage of aviation fuel in China," AVIC International said in a statement.

The expanding general aviation market in China is pushing AVIC International to take actions to occupy a vantage position in the market, some business insiders said.

AVIC International agreed that the acquisition is targeted at China's developing general aviation market.

"China's market has huge room to develop, as China only had about 1,300 general aviation aircraft as of the end of 2012, while 220,000 were in service in the US," Pan Linwu, chief financial officer of AVIC International, told people.com.cn.

But AVIC International's position in the global general aviation market also will be strengthened, as the clients of the engine builder are still foreign general aviation aircraft producers, experts said.

"The engine is a key part of an aircraft and purchasing foreign builders is the fastest and most-efficient method for Chinese manufacturers to develop in the area," said Gao Yuanyang, director of the general aviation industry research center of Beihang University.

In addition to advanced technology, the Chinese manufacturer also can learn the processes of obtaining certification in Europe and the US through operating the subsidiaries, Gao said.

Integration of the foreign subsidiaries will be an issue for the Chinese company.

AVIC International will retain its business model of thinking globally and operating locally by remaining in the Saxony region of Germany, said Thielert, which will be held by Technify Motors GmbH directly.

"The former business and managers will be kept and the company will not cut the payroll," said Pan.