Sherwood: Can China profit from Boeing’s woes?

There was nothing particularly special-looking about the twin-engine airliner parked on the tarmac at the Singapore Airshow in February. It was white, with the usual rows of rounded windows on either side and a red-and-blue airline logo emblazoned on the tail. But though its appearance was nondescript, the aircraft represented something potentially game-changing for aviation: a long-planned, well-funded, and extremely determined attempt by China to break into the tightly sealed $400B commercial-aircraft marketplace. “They’re serious about this,” said Shukor Yusof, an aviation analyst at Endau Analytics in Singapore.

The plane on display at the airshow was the C919, a narrowbody airliner built by the Commercial Aircraft Corporation of China, or Comac, a state-owned manufacturer headquartered in Shanghai. Though five of the machines are now flying domestically within China, the C919’s appearance in Singapore was the first time the plane had appeared abroad and marked an important step in what is widely regarded as a long-shot bid to take on the industry’s twin Goliaths, Boeing and Airbus. 

Until recently, many would have pegged the chance of success at practically zero. But with Boeing reeling from a series of blunders over the past six years, Comac’s chances right now are looking brighter. The flying public is newly wary of Boeing’s planes, and airlines have been stymied by the company’s production bottlenecks. “The Chinese are exploiting the shortage of aircraft in the marketplace,” Yusof said.

Boeing and Airbus have dominated the market

The secret of the Boeing-Airbus stranglehold on the commercial market is simply how difficult it is to build one of these machines. An airliner is a feat of technological prowess, pieced together from millions of component parts and controlled by software made up of millions of lines of code. It is not only their complexity that makes them almost unimaginably difficult to build, but also their reliability. Every single piece has to be rigorously documented, from manufacture to installation to maintenance, so that any failure can be traced back to its root cause, which can then be eliminated. As aviation pioneer Donald Wills Douglas famously quipped, “When the weight of the paper equals the weight of the airplane, only then you can go flying.”

It’s not just the vehicles themselves that are difficult to create. To operate them, airlines need a network of suppliers, regulators, training, maintenance that has developed over the decades to create and support them. And when an airliner has served out its useful life with an airline, there is a whole follow-on ecosystem into which it passes, sold on to the secondary market for use by second-tier airlines or cargo carriers, or broken down for parts.

Boeing has long dominated the system, with a handful of other US manufacturers nipping at its heels. But in 1970, a group of European governments banded together to support a joint project by French, German, and British aircraft companies to build a plane called the Airbus. The first model, a twin-engine widebody called the A300, slowly earned respect for its innovative design. Its third plane, the A320, was a hit. By 2019 it had passed the Boeing 737 as the best-selling aircraft in history. Today more than 11,000 have been built.

As Airbus was growing, so was Boeing. In 1997 it swallowed up its last US rival, McDonnell Douglas, leaving it in command of two-thirds of the global market. In the years that followed, it engaged in a seesaw battle with Airbus in which each company was producing a range of aircraft that could meet the world’s fast-growing demand for air travel, from the small 737 and A320s, to midsize 787s and A350s, and the huge 777s and A380s. Demand was so brisk that by the 2020s each company had more than 6,000 planes on backorder, enough to keep their production lines busy for years. With the price of entry into the market too high for any new competitors to break in, they essentially had a license to print money. All they had to do was keep doing what they knew so well how to do, and not screw it up.

Eyes on China

China, meanwhile, was watching all this happen and wanted in. Since the capitalistic reforms of Deng Xiaoping began in the 1970s, the country was on a mad race toward industrialization that had transformed it from the world’s eighth-largest economy to its second. Whole industries had fallen under its domination: computer chips, solar panels, furniture, consumer electronics, textiles. Why not airliners too?

Comac was founded in 2008 as a joint venture between several state-owned companies. Since then it has received more than $70B in state-related support. Its first aircraft, the ARJ21, was a 90-seat regional jet that’s smaller than anything Boeing or Airbus builds. But the next plane from Comac, the C919, was aimed straight at the duopoly. The 128-foot-long plane carries between 158 and 192 passengers, depending on the configuration — about the same as the 737 and A320. The first prototype flew in 2017, and the plane first entered service with state-owned China Eastern Airlines last year.

The question is, can Comac find other customers? As a debut effort, the C919 is pretty impressive, but it’s going up against planes that have decades of experience behind them. It’s not just David vs. Goliath, but rookie vs. veterans. And it’s widely believed within the industry that the overall quality just doesn’t match that of the incumbents’ planes. “The aircraft offers payload-range performance and economics which do not benchmark well with the most recent A320neo and 737 Max designs, despite having similar LEAP-1C engines,” said Rob Morris, global head of consultancy at the aviation-data provider Cirium Ascend. As a result, he said, the “C919 cannot really compete with Airbus and Boeing in open markets.”

One glaring problem is that the C919 is heavy. Comac originally planned to make the wing box, the crucial load-bearing structure that joins the wings and fuselage, out of advanced composite materials, but ultimately switched to aluminum, a less challenging material. It made the plane heavier — it weighs several tons more than the Airbus A320 — and that translates into reduced efficiency. The C919 has a maximum range of 3,000 nautical miles, compared to 3,400 for the A320 and 3,500 for the 737.

Another problem for the C919 is that it doesn’t have an international support network to provide operators with services like maintenance and training. “They haven’t even scratched the surface of what they need to do, which is to establish a global product support network,” said Richard Aboulafia, an aviation analyst at AeroDynamic Advisory. “That is hard.”

Then there is the fact that, given China’s lack of experience building airliners, the majority of the plane’s components are imported. According to the Center for Strategic & International Studies, three-fifths of the C919’s suppliers are American companies and a third are European. Given the high state of political tensions between China and the West, that dependency on important parts could prove an Achilles’ heel. In 2021, the US government designated Comac as being “owned or controlled” by the People’s Liberation Army, meaning that American individuals and companies can’t invest in it. If rising tensions spur the US government to cut off the export of parts to Comac, the C919 would be crippled.

Aboulafia is skeptical that a government-owned company, which must serve all the different constituencies and purposes, can hold its own in a competitive global market. “I can’t think of any examples of that working in this industry,” he said. “It’s like buying your car from the Department of Motor Vehicles.”

Perhaps the greatest hurdle is that, so far, the C919 hasn’t been certified in either Europe or the States, meaning that a huge proportion of the world’s air-travel market is effectively off limits, at least for now. The company has said it intends to seek European certification this year; it hasn’t yet said anything about getting approval from the US.

Comac’s outlook isn’t hopeless, however. Boeing’s recent catastrophes — the two 737 Max crashes, the blowout of a door plug over Oregon in January, and the string of lesser incidents that followed — has caused misgivings in the flying public, but more to the point, it has prompted an FAA crackdown on Boeing production that has left the planemaker unable to supply its customers at the expected rate. That’s left an acute shortage of planes at a time when the demand for air travel is growing quickly. In early April, United Airlines asked its pilots to voluntarily take time off the following month because of delays in receiving new planes from Boeing. Southwest has been forced to trim its schedule for the same reason.

Hunger for aircraft is especially pronounced in Asia, which is home to some of the fastest-growing air-travel markets in the world, with traffic increasing by nearly a third in the past year. But lack of airplanes is hampering further growth. Malaysia Airlines, for instance, ordered 25 new 737 Max aircraft but has received only two, with the rest to be delivered on a delayed schedule. The airline announced it would be “adjusting our plans to match those disruptions.”

This aircraft shortage has created conditions uniquely receptive to the launch of a new plane. Amid the intensifying demand for air travel, many customers may not care if the C919 has no track record to speak of; if it can get them to where they’re going for a reasonable price, they’ll ride it. “For the flying public in Southeast Asia, the price of the air ticket is more important than the type of aircraft they’ll fly on,” Yusof said. “So if you offer a flight, let’s say, from Singapore to Bangkok for $50, it’ll sell very quickly.”

To really pose a long-term threat to the duopoly, Comac is going to have to do what many Asian brands have done: gradually gain the public’s trust by steadily providing a high-quality product. That process will start with flights inside China, as local carriers use the plane within the country’s own fast-growing air-travel market, and then expand to countries in the region where China exerts enough influence to speed the plane’s adoption. The company reportedly wants to amass a million hours of collective flight time before delivering the aircraft to foreign customers.

After the Singapore airshow, Comac sent a C919 on a tour of Vietnam, Cambodia, Thailand, Malaysia, and Indonesia, conducting demonstration flights in each country. Indonesia holds out the greatest immediate promise as a market for the plane. China is Indonesia’s largest trading partner and a major source of investment; it channeled some $7B to the country in 2023 alone. In particular, China has poured money into high-profile infrastructure projects like Southeast Asia’s first high-speed railline. This kind of largesse has earned it a friendly environment for things like airplane certification. Indonesian carrier TransNusa is the first airline outside China to use Comac jets, having operated two ARJ21s since last April, and it has said it is open to operating the C919 as well. (TransNusa is owned by China Aircraft Leasing Group, a subsidiary of the state-owned China Everbright Group.)

A possible customer?

Given its start, it’s plausible that the C919 could help China to elbow its way into contention with Boeing and Airbus, even if, as with the A300, it isn’t a rip-roaring success on its own. According to Aviation Week, Comac has already received more than 800 firm orders for the plane, almost all from within China. The company plans to ramp up production from 26 aircraft in 2024 to 72 annually by the end of the decade, at which point it hopes to command 5% of the world’s commercial-aircraft market. “Obviously that sounds small, but 5% of the global aircraft market is quite substantial,” Yusof said.

Most of that 5% will lie within the massive Chinese domestic market. Breaking out beyond it and gaining equivalent stature to Airbus and Boeing in the international marketplace will take patience. An important step along the way will be winning an order from a first-tier carrier. That won’t be easy, but one first-rank airline stands out as a potential gateway customer: Cathay Pacific. Based in Hong Kong, the airline’s largest shareholder is the UK-based Swire Group. But since Hong Kong reverted to Chinese rule in 1997, Swire has come under pressure to shift ownership to mainland control. If that happens, there will be tremendous pressure for Cathay to adopt a Chinese-made airliner.

Many are skeptical that Comac can pull off its dream of becoming a first-tier aircraft manufacturer. But its ambition is not unprecedented. Back when Airbus rolled out the A300, dubiousness abounded about its chances. Last year, Airbus delivered more planes than Boeing. Getting to that point wasn’t easy. It took determination, patience, and deep-pocketed government support. Comac certainly has all three.

This article orginally ran on April 9, 2024 on the Sherwood business-news website. In fact it was the top story on the first day of publication!

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