Chinese challenge Boeing and Airbus Duopoly but for what reason?
The commercial aircraft market has been dominated by Boeing (USA) and Airbus (EU) and according to Airbus’ Global Market Forecast 2015, in the next 20 years, passenger air traffic will grow annually at 4.6 percent driving a need for around 32,600 new passenger and freighter aircrafts. This duopoly has existed since Airbus introduced its long-range A330/A340 in the 1990’s when it challenged Boeing’s monopoly position. However, the Chinese are now challenging the duopoly’s market share by introducing its alternative to the Boeing and Airbus options. COMAC, a Chinese state-owned planemaker, has revealed its C919 plane as a competitor to the Airbus 320 and Boeing’s 737 although the C919 will not be ready for service until 2019.
Eventhough COMAC is state backed there are still significant barriers to entry for the commercial airline manufacturer.
- It is anticipated that the C919 fuel efficiency will not be a the levels of the newer versions of the Boeing 737 and Airbus A320.
- The Chinese have little experience in creating complex production systems and supply chains. Boeing research and development costs for the new Dreamliner, grew to $28 billion as a result of problems with its supply chain.
- They will need to improve their safety records in order to encourage sales. COMAC’s regional jet, the ARJ21, had its first test flight in 2008, but has yet to be certified because of poor wiring and cracks on the wings.
Are the Chinese actually trying to break the duopoly?
COMAC’s goal of breaking up the Boeing/Airbus narrow-body aircraft duopoly is a challenging ordeal but is this the motivation behind the C919? With China’s secret-capitalist economy, the central government likes to use American or European aircraft orders as a way of correcting a trade imbalance. Although they would still be importing the avionics and engines from around the world, the overall value of those components are insignificant when compared with a complete aircraft. China does need planes now and with the growing income levels of the economy there will be huge demand for air travel. But what is ironic is that Airbus already have a factory in Tianjin making the A320 aircraft although COMAC are realistic that new aircraft take significant time to put into service and therefore still require Airbus planes.
China has established itself as a economic powerhouse but they also want to be seen as having the innovative ideas and technological knowledge to challenge the established market. By producing a state-of-the-art aircraft they can announce their arrival on the world stage of innovation. The C919 is a pathway to achieving this.