Seeks cracking the Boeing Co-Airbus SAS hold over the market
China is taking aim at the heart of the global commercial aerospace industry with a jet dubbed “The Big Plane,” seeking to crack the duopoly Boeing Co and Airbus SAS hold in the $70-billion-a-year market.
Government-controlled planemaker Commercial Aircraft Corp of China showcased a model at the Hong Kong air show on Tuesday of the 168-seater C919 that it’s slated to enter service in 2016. Comac is marketing the jet as a cheaper alternative that uses as much as 15 per cent less fuel than Boeing 737s and Airbus A320s airplanes, which dominate the single-aisle plane market.
“They have a good mix of technologies and westernised standards,” Christof Spaeth, senior vice president of Jet Aviation AG, a Zurich-based unit of General Dynamics Corp that customises airplanes, said while studying the C919 model at the air show. “So it might find its way from the home also to some international markets. It’s not easy but there’s a chance.”
China’s jet plans underscore its ambition to move beyond a low-cost assembler for Japanese and western economies and break into established industries such as shipbuilding, mobile phones and automobiles. While Boeing and Airbus have struggled with production delays of their own models, China has accelerated the first test flight of the C919 to 2014. Boeing predicts China will need 3,710 new planes over the next 20 years.
Developing a new single-aisle commercial jet can cost about $5 billion and take five or six years for a planemaker with an established infrastructure and engineering resources, while a widebody model can cost twice as much. Creating such programs would cost a multiple for a company just getting started in the market, said Nick Cunningham, an aerospace analyst at Evolution Securities in London.
China first unveiled plans for the model in late 2008 and originally set entry into service for 2020. The accelerated development since then contrasts with Boeing, which is 2 1/2 years behind on its 787 widebody plane, while Airbus is focused on developing its new A350 mid-range model. That’s left the two planemakers with fewer resources to pour into new versions of their bestselling single-aisle models.
“You’ve got to blame Airbus and Boeing to some degree for leaving the door open,” Cunningham said. “If they wanted to do a crash program, to develop a plane that’s useful for the domestic market and only for domestic, maybe they could do it really fast.”
China won’t need to target global sales once the jet enters the market because the country, already the world’s No 2 market after the US, will likely account for as much of a quarter of all planes bought within five years, European Aeronautic, Defence & Space Co estimates.
“They are very ambitious and they are putting a lot of money into it,” Louis Gallois, chief executive of Airbus parent EADS said in an interview in Paris August 28. “They have the basic technologies and it means that they will be competing in the market by the end of the next decade for single aisle planes.”
Government-backed Comac was created in 2008 with an initial investment of about $2.8 billion and is based in Shanghai. The company includes assets of state-owned companies Aviation Industry Corp of China I and II that are already involved in China’s regional jet programme. The two men running Comac, Zhang Quingwei and Jin Zhuanglong, were part of China’s programme that put the country’s first astronauts into space.
While Comac won’t exclude the possibility of cooperating with western companies on systems such as engines, the company said last November it would favor the use of locally made parts as it seeks to develop the nation’s aerospace industry. Some 49 local companies have been involved in developing technologies.
To be sure, China won’t be the only country competing for a larger slice of the global single-aisle airplane industry, which makes up as much as 70 per cent of the total. Canada’s Bombardier Inc, whose largest available jet now is the 100-seat CRJ1000, will move into the lower end of the large-plane market in 2013, with its planned 110- to 130-seat CSeries.
Brazil’s Empresa Brasileira de Aeronautica SA, a regional aircraft maker, sells a model with as many as 114 seats, yet it would have the ability to build a larger model later. Mitsubishi Aircraft Corp of Japan, already a major subcontractor for Boeing, is finalising preliminary designs for a regional jet that will seat 90 and may serve as a blueprint for larger models.
One obstacle uniting all companies who seek to crack the market established by Boeing and Airbus will be to win customer acceptance, and persuading airlines that they can count on them for product support and service throughout the life of the jet.
“When you build these machines, the issue is rarely, can you build it,” Boeing CEO Jim McNerney said at a September 2 conference organised by Morgan Stanley when asked about China. ‘The issue is, will the company stand behind it for 25 years, and will the company have the wherewithal to evolve derivatives, the next fleet of airplanes and all the services that come with selling these things?”
