China's first foreign-controlled aircraft maintenance, repair and overhaul (MRO) joint venture was established in Shanghai on October 24.

The new facility, in which Boeing holds a 60-per-cent stake, is also the first time that the US aircraft manufacturer has taken a controlling share in an MRO joint venture.

Shanghai Airport Authority (SAA) and Shanghai Airlines respectively hold the remaining 25 per cent and 15 per cent stakes.

The joint venture, called Boeing Shanghai Aviation Services Co Ltd, is not only expected to allow Boeing to capitalize on the booming aircraft MRO market in China, but will also help build Shanghai into an international aviation hub by 2010.

"Working together, we are taking the first of many steps towards offering our airline customers the services that will help them safely and efficiently expand, while keeping pace with the tremendous growth in commercial aviation that we see in China over the next 20 years," Scott Carson, president and chief executive officer of Boeing Commercial Airplanes, said at the groundbreaking ceremony of the MRO plant on October 24.

Construction of the plant, which requires a total investment of US$103 million, will take up to two years to complete. It will have a four-bay hangar, with each one capable of housing wide-body aircraft.

The plant, at Shanghai Pudong International Airport, will perform Boeing's passenger-to-freighter conversions, upgrades to aircraft interiors, avionics and entertainment systems, as well as line maintenance and heavy maintenance checks.

The Shanghai facility is likely to become a major base for Boeing to convert B767-300 passenger jets into freighters.

Boeing launched the B767-300 conversion programme last year, and has so far received five orders from All Nippon Airways. The first converted freighter will be delivered in early 2008.

Boeing forecasts that, over the next two decades, 75 per cent of freighters will come from conversions and only 25 per cent will be new ones.

Converted freighters are a cost-effective solution for airlines to increase air cargo capacity, as conversion increases the value of existing aircraft and gives aeroplanes a new lease of life.

Boeing launched the B747-400 conversion programme in January 2004. It has received 36 orders and delivered five converted jets, with conversion undertaken by Taikoo (Xiamen) Aircraft Engineering Co Ltd. The company, in which Boeing holds a 9.09 per cent share, is located in Xiamen, East China's Fujian Province.

Boeing said it would probably feel a temporary impact from Airbus' delayed delivery of the A380 superjumbo because airlines are reluctant to give up their capacity by converting existing B747-400 into freighters "as early as Boeing has anticipated."

"But I believe that is just short-term. The market demand for conversion will remain robust in the long term," Carson said on Monday after arriving in China.

This is his first trip overseas since he took up the post at the beginning of last month after former CEO Alan Mulallay left for Ford Motor Co.

"With the market demand for aircraft MRO increasing rapidly, the joint venture will certainly have a promising future," said Li Derun, SAA's executive vice-president.

"It is also necessary for Shanghai to have a world-class, high-quality MRO plant if the city is going to become an international aviation hub," Li said, adding that the plant would help Shanghai attract more airlines.