If at first you don't succeed, try again.
China, in its decades-long quest to build a domestic airplane, seems to have taken that age-old pearl of wisdom to heart. Despite a string of foibles and failures in its previous efforts, there's good reason to believe that China's latest initiative -- the Commercial Aircraft Corp. of China (Comac) -- has a decent chance of getting off the ground.
"I think their prospects for success this time around are much greater," asserts Anil Gupta, a professor of strategy at the University of Maryland and a visiting professor at INSEAD business school's Singapore campus.
Formed in 2008 by the Chinese government, Comac already is taking orders for its two airplanes: the ARJ21 regional jet, which is scheduled to enter service in third-quarter 2011; and the C919 jumbo jet, which is scheduled to enter service in 2016.
With the C919, China is angling for a piece of the pie in the single-aisle aircraft category dominated by Airbus and Boeing -- a category that Boeing expects to more than double in fleet size globally by 2029.
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| A prototype of Comac's C919 on display at the Asian Aerospace International Expo and Congress in Hong Kong. Photo: Business Wire |
But China's goals for Comac go beyond capturing market share. Comac is part of China's codified strategy to develop "national champions" in the aviation and aerospace, automotive, electronics, oil and gas and other key industries, explains Usha Haley, a professor of international business at Massey University in Auckland, New Zealand, and co-author of the upcoming book "Subsidies to Chinese Industry: State Capitalism, Business Strategy and Trade Policy."
"The Chinese have seen it as in their strategic interest to bolster these industries, which accounts in part for why they want to build national champions and challenge the dominance of Boeing and Airbus through them," Haley says. "They're not so much interested in making profits. What they're interested in is size, growing and dominating the industry. That's their goal."
Comac has a lot going in its favor. It is lustily capitalized (by a consortium of government agencies and state-run companies), and it is partnering with Western technology leaders such as GE, Honeywell and Rockwell Collins to develop and build the subsystems and components -- a departure from China's past insistence on de novo technology creation.
Then there's the Chinese aviation market. Boeing recently projected that China will need 4,330 new commercial airplanes over the next two decades, which would triple China's airplane fleet and make it the largest airplane market outside of the United States. Boeing predicts that 71% of that demand will be for single-aisle airplanes -- a category that includes the Boeing 737, the Airbus A320, and, potentially, the Comac C919.
"China is one of the world's fastest-growing and dynamic aviation markets, driven by the urbanization of China, the growth of its economy and ever-increasing personal wealth," said Randy Tinseth, vice president of marketing for Boeing Commercial Airplanes, when Boeing released its market outlook this past November. "We expect domestic passenger traffic for China to grow at a rate of 7.9% on average."
At a Glance: COMAC Name: Commercial Aircraft Corp. of China |
With the three largest Chinese airlines -- Air China, China Eastern and China Southern -- under state control, Comac could have a leg up on Boeing and Airbus in the scramble to capture China's booming domestic market, says Perry Flint, editorial director for Air Transport World magazine.
"You can be pretty sure that the Chinese airlines are going to be under strong pressure to order [a Comac jet] whether they want to order it or not," Flint says.
A different test will be whether Comac's C919 can challenge the Boeing-Airbus duopoly outside of China. Noting that commercial airlines are, by necessity, "extremely risk-averse," Gupta asserts that "foreign airlines are unlikely to buy the C919 until some time has passed and it has proven itself as a safe, reliable plane within China."
Scott Hamilton, founder of Leeham Co. LLC, an Issaquah, Wash.-based aviation industry consulting firm, agrees, adding that "both the ARJ21 and the C919 are going to have limited sales outside China to [China's] political allies."
In fact, Hamilton doesn't expect either jet to be especially competitive, and he notes that neither jet features anything groundbreaking in the way of technology or design. The ARJ21 looks like a "downsized" version of the McDonnell Douglas MD-80, Hamilton says, while the C919 "looks pretty similar to the [Airbus] A320, which is not particularly surprising since Airbus established an A320 assembly line in Tianjin."
But that's not the point, Hamilton argues.
"This is going to take some time. This isn't going to happen overnight," Hamilton says. "The Chinese are very patient people. As I like to put it, they waited 99 years to get Hong Kong back. They can wait a generation to create a viable commercial aviation industry."
Through Comac and its relationships with Western suppliers, the Chinese are gaining valuable experience in modern production techniques and are immersing themselves in our technology, Hamilton says. That's why he calls the ARJ21 and the C919 "proof-of-concept airplanes" -- and he believes they are the "first of airplanes to come."
"It took Airbus 25, 30 years to reach parity with Boeing," Hamilton says. "There's absolutely no reason in the world to think that China can't do the same thing. That's a generation."
