Sunday, November 8, 2015

A Chinese competitor to Airbus and Boeing?

It is hard to tell if the FAA will be willing to certify the new Chinese COMAC C919 which is a major setback for the company as this means that the C919 will not be able to be sold in the United States. A previous jet, the ARJ21, also hasn’t been certified by the FAA even though orders are set to be delivered globally. Since the certification of the C919 is directly affected by the ARJ21 it is not likely to receive certification anytime in the near future and COMAC has been mainly focused on getting certification from the Civil Aviation Administration of China.
The C919 will be a source of national pride for China and I believe that COMAC do its best to prove that the airplane is safe by getting certification in China and the United States. Even with most of the key components of the aircraft coming from foreign companies I think that U.S. air carriers will be hesitant on purchasing the C919. Whatever decisions airlines make will depend on what makes money and if people have the idea that Chinese made products are inferior then air carriers will be reluctant to make the C919 an addition to their fleets. Public perception will be a huge problem for any airline planning to fly the C919 as it will be seen as unsafe. There are also past Chinese domestic aircraft that have had a negative effect on Western perceptions of Chinese produced aircraft. The XIAN MA-60 is an aircraft that has been in the spotlight negatively for many years following a high number of accidents. Even Chinese airlines refuse to fly it and they have to be highly subsidized and in some cases gifted in order to reach the market.
If U.S. carriers purchase the C919 will COMAC how quickly will COMAC be able to produce the aircraft? 517 of the aircraft have been ordered so far and that is almost exclusively domestically. The aircraft is also not expected to be introduced until 2019. It will take years to deliver enough aircraft to meet demand and that is without any international orders. According to Boeing, in 2017 it will produce 47 single-aisle airplanes per month, more than 560 per year.  I do not see many air carriers using the C919 especially since Airbus and Boeing have already proven to be reliable with decades of service. The C919 may be a safe aircraft but in order to compete it would have to offer something new or innovative to the market.
COMCAC is a limited liability company that is owned by the People’s Republic of China. It implements large passenger aircraft programs within China as well as developing regional jet liners in China. The mission of COMAC is to let Chinese made aircraft fly through the sky. COMAC wants its aircraft program to be a symbol of reform and open policy in the new era of China as well as making COMAC a world-class aviation enterprise. Through COMAC China hopes to create an innovative aviation industry with its own characteristics and technology. Currently COMAC has developed the CRJ21 and the C919. The CRJ is a short and medium range regional aircraft that was developed in China with its own intellectual property rights (COMAC, 2015). In addition to the two aircraft already developed the company is already planning to produce a competitor to the Boeing 777, the C929. The C929 is in the research stage of key technologies and is reported to use domestic engines and carry 300 passengers (Jin, 2015).
The C919 was built as a direct competitor to the duopoly of Airbus and Boeing in the global market. COMAC expects to sell 2,000 of its aircraft within the next 20 years and has received about 517 orders (Jiang, 2015). Even with certification I do not think that the C919 can compete in the global market on the scale of Airbus and Boeing. One reason is that it is too dependent on foreign suppliers to produce the aircraft which is not unusual because even Airbus and Boeing outsource part globally. China requires its suppliers to form joint-ventures with Chinese which caused international companies to balance accessing the C919 with protecting their intellectual property rights. Another problem I see with China being able to compete is the duopoly that Boeing and Airbus have on the global market. Boeing, which currently dominates the market at 43%, has 648 commercial aircraft deliveries. Airbus comes in a close second with 626 deliveries (Team, 2014). There is no doubt that the C919 will compete domestically but internationally Western companies will still dominate the industry. It will take a long time for COMAC to become a serious competitor but it is possible if even a couple of decades away.  Irkut, a Russian company has unveiled an aircraft that may compete with Boeing and Airbus. The MC-21 has performed outstandingly and will most likely be cheaper due to the weak ruble. A big challenge to the program will be Russia’s international relations and political pressure within Russia to use domestic suppliers. Bombardier has been trying to compete with the introduction of its CSeries program but the rising costs and long delays have left investors worrying whether the company will be able to pull through. As of now it looks as if Boeing and Airbus will not have to worry anytime soon but a lot can happen in only a few years.
So far both Airbus and Boeing have been supportive of COMAC and have congratulated then, stating that the market is big enough for another manufacturer. Both of the companies have been increasing their foothold in China and developing aircraft to compete with their Chinese rival.

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