China and Japan are Ready to Break Boeing-Airbus Aviation Duopoly

05/07/2019

For decades, Europe and the US have had a powerful duopoly over the aviation industry but Boeing’s crisis is giving Asia an unexpected chance. Will China and Japan be able to be competitive game-changers?

 

Boeing’s poor handling of the MAX-8 crisis is giving Asia an unexpected chance, that of breaking the European-US manufacturing duopoly in commercial airplanes of Boeing and Airbus. And guess who is ready to make an entrance in the aviation game? The Asian Dragon, of course, followed by Japan, which is finally poised to break into aviation in a big way.

With Boeing’s reputation still recovering from two catastrophic MAX-8 crashes in five months, next Aviation Expo China to be held in September could turn into a big milestone into the aviation history, marking the end of the Western monopoly by bringing new unexpected options to the fore.

 

For decades, there have only been really two choices when it comes to commercial aircraft, Boeing and Airbus. The two companies have virtually locked up the market for commercial jets of every size, supplying their aircraft worldwide.

 

Until now, the US and Europe have been competing to meet the market’s demand, especially China’s seemingly insatiable appetite for commercial airplanes.

According to estimates, air travel in the Middle Kingdom is growing so fast that in the next 20 years the nation’s airlines will need at least 9,000 new airplanes and most of them will be single-aisle. Therefore, recent events could change the Chinese need for foreign supplies, favoring the country’s major plan to end China’s dependence on Western technology by 2025.

“The aviation market in Asia is expected to grow further in the coming years and there will be demand for these aircraft,” said Lee Dong-heon, an analyst at Daishin Securities Co. in Seoul. Will the Asian countries just turn to the Boeing’s rival Airbus or there is room for China and Japan to bridge the gap?

 

China and Japan break aviation duopoly - beijing - cifnews

© Unsplash. Beijing. From 18 to 20 September, the China National Convention Center in Beijing will host the Aviation Expo China 2019, a biennial event that showcases aeronautical engines and gas turbines.

 

Long before the grounding of the MAX-8, Airbus was clearly ahead of Boeing in the PRC. Nearly a quarter of Airbus sales are in China, compared to 14% for Boeing. To start its independence from the West, the People’s Republic has thus targeted the most profitable market, for the basic airline workhorse, single-aisle jets carrying between 160 and 200 passengers on domestic routes.

Therefore, in 2008, Beijing launched a program to build the first C919 – C for Commercial Aircraft Corporation of China (Comac), the government-financed company tasked with the mission – based on the design of the Airbus A320, which is a newer model compared to the counterpart’s Boeing 737. Seating up to 168 people, China’s first large passenger jet carried out its maiden flight on May 5, 2017, and it already completed its third test flight last December, while first commercial deliveries are scheduled for 2021 with launch customer China Eastern Airlines.

 

Comac’s strength is that it already has access to a huge and growing market. Indeed, by the mid-2020s, China’s aviation market is expected to overtake the US as the world’s largest by traffic.

 

In some ways, Airbus has helped the Chinese with their own learning curve. When they opened an assembly plant in China over 10 years ago, it gave the Chinese the opportunity to get some hands on experience of the production process. However, Comac is still lacking domestic supply chain and thus had to set up partnerships with many of the biggest names in aircraft manufacturing such as Rockwell Collins, UTC Aerospace, Thales, CFM, and others.

Comac’s dependency on international suppliers is actually the company’s biggest weakness, especially since the Trump administration started the trade war with China. However, even so, the Chinese are not discouraged, neither they intend to slow down their plans.

Somehow, the PRC will be able to exploit this opportunity to establish the C919 as an Asian-built airplane that will be supported by the world’s largest domestic airline market. According to data from consultancy Frost & Sullivan, the firm has already received nearly 1,000 commitments for the C919, mostly from Chinese airlines and domestic leasing firms.

Moreover, Chinese designers are already moving on. They are developing a larger widebody jet to compete with the Boeing 787 and Airbus A350 to be ready by 2025, this time partnering with the Russians. It is the CR929, a widebody aircraft with a range of 12,000km that seats 280 passengers.

 

China and Japan break aviation duopoly - comac - cifnews

© Comac. Comac’s order book includes the country’s three major carriers Air China, China Southern, and China Eastern.

 

Nevertheless, building an airliner is no mean feat. The Russians tried with the Sukhoi Superjet, but a crash during a demonstration have meant sales have never really taken off. Japan too has been working on the Mitsubishi Regional Jet (MRJ) for years, with technical glitches demonstrating that they are still a way down on their learning curve.

However, now, the Land of the Rising Sun is ready to change its aviation history, finally launching the first Japan-built airliner in 50 years able to compete with Boeing and Airbus. Development for Japan’s first homegrown passenger plane in over five decades began in 2008. The first delivery initially was scheduled for December 2013, but the date has been pushed back five times.

 

Finally, last March, the Mitsubishi Regional Jet began certification flights in Moses Lake, Washington. A longtime supplier of aircraft components to Boeing, Mitsubishi Heavy Industries Ltd. is developing the MRJ to emerge from its customer’s shadow.

 

With few seats and smaller fuselages, regional jets are a different class of aircraft from larger narrow-body planes such as Boeing’s or Airbus’ already mentioned models. The MRJ has a range of about 2,000 miles, while a smaller variant can haul up to 76 people for about the same distance.

Mitsubishi initially planned test flights in 2012 but the project has been slowed by production difficulties. Now the company, which makes ships, nuclear power plants, and aerospace components, expects to have the plane ready for customers next year.

However, in order to compete, Mitsubishi can not just rely on its home market. Japan is founding a profitable market in the United States, where large airlines try to cut costs by outsourcing short flights to smaller carriers that fly regional jets. Here, Trans States Airlines Inc. already ordered 50 of the planes, with options for 50 more, in 2020.

 

China and Japan break aviation duopoly - mitsubishi regional jet - cifnews

© Mitsubishi Aircraft Corporation. In March 2019, the Japanese Mitsubishi Regional Jet began its first certification flights in Moses Lake, Washington.

 

Actually, to see if China and Japan are able to break the aviation duopoly, we need to wait until these Asian airplanes will effectively enter the fly routes. Right now, only China’s aviation regulator has certified Comac jets to fly. Therefore, its aircraft may operate in parts of Asia, Africa, and South America, where the Chinese certification is recognized.

However, although some in the industry are still skeptical that Chinese-made jets will rival those of Boeing and Airbus in the near-term, Shukor Yusof, founder of aviation advisory firm Endau Analytics, admits that we should not “underestimate Chinese ability to penetrate markets.”

Even if the US and European doors remain shut, Comac has access to a huge and growing market. By the mid-2020s, China’s aviation market is expected to overtake the US as the world’s largest by traffic.

Moreover, Comac has already established itself in emerging markets such as Africa and Asia due to the more affordable prices of its planes. In addition, through the Belt and Road Initiative, Beijing is already funding those infrastructures designed to meet the requirements of the Comac’s planes.

Therefore, compared to other international aviation companies, the Dragon has the advantage of benefitting from the support in China’s broader foreign policy goals to build Comac’s customer base. Moreover, although China and Japan have always been major buyers of Western planes, the crisis facing Boeing could generate more interest in locally-made alternatives.

We are still far from seeing the Dragon replacing the US in the aviation duopoly, but the big entrance of Chinese and Japanese aircraft in the market is certainly a great game-changer. And this makes the break of the duopoly even more certain and closer.

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