The Boeing-Airbus duopoly in the commercial aviation space may face some competition in the future once China’s first passenger airplane takes to the skies. China took the wraps off its first passenger jet, the twin-engine C919, early this month in an effort to create its presence in the aviation industry and contend with the likes of Boeing (BA, Financial) and Airbus (EADSY, Financial). The aerospace market is currently dominated by the two stalwarts, with Bombardier (BDRAF, Financial) and Embraer (ERJ, Financial) occupying an insignificant portion of the total market share.
The single-aisle C919 is being developed by China’s state-owned Commercial Aircraft Corporation of China, or COMAC. Will China be able to shake the dominance of Boeing and Airbus? What can we expect in the near future? Let’s take a quick look.
Competing with the 737 and A320
The C919 that was displayed at a ceremony was put under a banner that read "A dream takes off." This airplane seems to have given wings to China’s ardent wish of getting into the aviation space.
The C919 is a narrow-body jet with seating capacity of up to 174 passengers. It is meant to compete with the similar-sized Airbus A320 and Boeing 737, the bread-and-butter workhorses for the two airplane manufacturers. The single-aisle jets are also among the most popular and high-demand planes among airlines across the world.
The C919 touts a flying range of up to 5,555 kilometers, or 3,451 miles. With this range it is said to comfortably fly common leisure and business routes such as Beijing to Bangkok or Shanghai to Singapore. The airplane program was launched in 2008, marking China's return to the aviation business following its abortive effort decades ago in the 1980s.
The C919 was scheduled to enter service last year, which was supposed to be marked as the year of its first delivery to the Chinese airlines. The program suffered production challenges, however, which delayed the process. The built-from-scratch plane is slated to undergo testing in the next two to three years, and get certification from China's civil-aviation regulator before hitting the runway sometime around 2018.
As reported by BBC News, China's civil aviation chief, Li Jiaxiang said, "A great nation must have its own large commercial aircraft…China's air transport industry cannot completely rely on imports." China’s plans are finally taking shape as it advances toward its big dream to break into the commercial aviation market, while the air travel demand soars across the world, particularly in the mainland.
The big jump
COMAC has already divulged its plans of entering into the wide-body arena once it gets a strong footing in the narrow-body market.
The government aims to use the C919 as a facilitator to build its aviation industry. This could require the involvement of over 200 firms, 36 universities and simultaneously create thousands of jobs for plane manufacturing.
The advanced technologies of the plane, right from avionics to the airframe made of the light composite material, is being flaunted by the State media. Boeing 787 Dreamliner is the first ever plane that used composite material to boost fuel efficiency. The Wall Street Journal reports that the plane is made of several components that have been sourced from global suppliers that include avionics made by Rockwell Collins, Inc. (COL, Financial) and engines from CFM International Honeywell (HON, Financial), which is said to have made the power system and landing gears.
The launch of C919 is a critical step for China's developing aircraft industry. Apart from COMAC, there’s another Chinese company that builds planes. However, those are regional jets and come in the category of planes made by Bombardier and Embraer.
Welcoming the new kid on the block
Airbus seems to have accepted the challenge sportingly. An Airbus spokesman welcomed COMAC and congratulated it for accomplishing the "important milestone." He further said, "The market is big enough for more than two manufacturers."
But what really poses a big threat to the two companies is that the two have established production plants in the mainland as each seeks to increase market share in the growing economy.
Airbus makes the A320s in Tianjin, and Boeing has a completion and delivery center where it installs the interiors of the 737s. As such, the duopoly runs the risk of imparting their technical know-how and the basic fundamentals of developing a plane to their rival.
Where’s the aviation market heading?
China’s demand for new passenger jets is growing at an explosive rate. Boeing predicts the market to take deliveries of 6,300 new planes over the next two decades. Airbus is also bullish about the market’s potential. A domestic player in the country could be a big menace for the duopoly’s future. COMAC has bagged over 500 orders for the C919 and expects to deliver around 2,000 planes in the next 20 years. While that doesn’t disturb Airbus and Boeing’s dominance in the foreseeable future, the competition may gradually intensify in the long run.
Disclosure: I have no positions in any stocks mentioned in this article.
