Boeing is likely to set up an aircraft maintenance, repair and overhaul (MRO) base in Shanghai in the first half of next year, the first such foreign-controlled facility in China.

The US aircraft giant will initially invest over US$100 million into the company, in which Boeing will hold a 50 percent stake, said David Wang, Boeing China's president.

Shanghai Airlines and Shanghai Airport Authority will hold the remaining shares. The joint venture is now waiting for final government approval.

Wang made the remarks yesterday on the sidelines of a delivery ceremony in Xiamen, in East China's Fujian Province, for the first 747-400 Boeing converted freighter to Cathay Pacific Airways. The jet was converted from a 14-year-old Cathay Pacific passenger aircraft.

Taikoo (Xiamen) Aircraft Engineering Co Ltd (TAECO), one of China's largest MRO suppliers, completed the modification in September. Boeing test pilots flew the airplane from Xiamen to Hong Kong and conducted two months of flight testing.

This is the first time Boeing has completed a major flight test program outside the United States.

Boeing launched the 747-400 passenger-to-freighter program in January 2004. So far it has received 37 firm orders for conversions from six overseas airlines. TAECO, of which Boeing holds 9.09 percent, will be responsible for converting 33 such airplanes.

"TAECO is our first partner in the 747-400 conversion. Its technical performance is superb," said Lou Mancini, vice-president and general manager for Boeing Commercial Aviation Services.

Converted freighters have been a cost-effective solution for airlines that want to increase air cargo capacity. It helps increase the value of existing aircraft and gives an airplane a second life. More than half of the freighters that are currently in service around the world have been converted from passenger jets.

TAECO will convert, for Cathay Pacific, another two 747-400 passenger jets into freighters in 2006 and three in 2007.

Derek Cridland, Cathay Pacific's engineering director, declined to reveal the cost of the conversion. But he said: "The conversion is a good solution for an airline that wants to quickly add air cargo capacity."

It takes about four to five months to convert a 747-400 passenger jet into a freighter, which is a much shorter time than it would take to deliver a brand new jet.

Cathay Pacific is the world's sixth-largest air cargo carrier in terms of tonnage carried. The converted freighters will be used on cargo routes between Asia and North America and Europe.

Also yesterday, TAECO opened its fourth maintenance hangar commissioned specifically to convert further freighters.

Founded in 1993, TAECO is 54.55 percent owned by Hong Kong Aircraft Engineering Company Ltd, with 10 percent owned by Xiamen Aviation Industry Co Ltd and 9.09 percent by Cathay Pacific.

Another 9.09 percent is owned by Japan Airlines and 8.18 percent by Beijing Kailan Aviation Technology Development and Service Co, which is a wholly-owned subsidiary of the General Administration of Civil Aviation of China.

The global air cargo industry is one of the fastest growing segments of the aviation market. The Boeing World Air Cargo Forecast 2004/2005 projects that the industry will grow at an average annual rate of 6.2 percent over the next 20 years, significantly higher than projected passenger traffic rates. Cargo traffic growth rates for Asian routes are projected to grow at over 7 percent.

(China Daily December 20, 2005)