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Source: Forbes.com Forbes.com

China Rolls Out First Turboprop Aircraft

Published: 01 Jul 2008 16:45:59 PST

SHANGHAI - With its airlines squeezed by soaring jet fuel prices, China is betting that the market is ripe for its first standard turboprop aircraft, billed as cheaper and more fuel-efficient than its peers.

The prototype 60-seat Xinzhou 600, or Modern Ark 600, powered by a turboprop engine, slid off the production chain yesterday in Xi'an, Shaanxi province, marking another stride toward China's goal of being a global player in aircraft manufacturing. The Xi'an plant, operated by Xi'an Aircraft International Corp., a subsidiary of China Aviation Industry Corp. I, known as AVIC I, upgraded the MA600 from the heavier, less fuel-efficient MA 60, which has served carriers in Africa and Southeast Asia.

Scheduled for a Sept. maiden flight and mass production late next year, the plane costs around $15 million; comparable aircraft already on the market are priced at $18 million-$20 million, according to Shanghai-based analyst Jack Xu, who tracks the airlines for SinoPac Securities. It also burns 40% less fuel than other turbofan planes, company officials told the Chinese press.

Large jets manufactured by Boeing (nyse: BA - news - people ) and Airbus currently dominate China's commercial fleet. The North American market has been more receptive to turboprops than has China, said Hong Kong-based airline analyst Eric Lin of HSBC. Slightly more than 10% of planes used by domestic carriers are regional aircraft, according to Xinhua, the Chinese state news agency.

But Beijing aviation officials hope that cost and fuel efficiency considerations will tempt domestic and overseas carriers. They are aiming for 300 orders worldwide over the next decade, with up to half from Chinese airlines. Production will average between 13 and 15 aircraft per year, Xu said.

Because of increased jet fuel costs, propeller-driven planes are making a comeback, despite passenger perceptions of smaller planes as providing less comfort than do large jets. For cash-strapped airlines, turboprop planes, devouring a quarter to a third less fuel than regional jets, are an enticing alternative to jets for servicing short- and medium-length flights. The world's top turboprop aircraft suppliers, Canada's Bombardier (other-otc: BDRAF - news - people ) and France's ATR, took 40% more orders this year, up from 100 last year.

Eager to compete with Boeing and Airbus, China is also set to unveil its first passenger jet, the ARJ21, in September.

In afternoon trading in Hong Kong, Xi'an Aircraft International Corp. was up 6.4%, to 17.02 Hong Kong dollars ($2.18).

-- The Associated Press contributed to this article.

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