China’s Delays on Regional Jet Weaken Threat to Boeing, Airbus Duopoly
China’s bid to break Airbus SAS and Boeing Co. (BA)’s stranglehold on the global aircraft market is being hindered by a four-year delay in delivering the nation’s first passenger jet.
The 90-seat ARJ21 won’t enter service this year as it is still going through safety tests needed to win certification from China’s aviation regulator, Tian Min, chief financial officer of state-controlled Commercial Aircraft Corp. of China Ltd., said last week. The plane was due to begin commercial flights service as early as 2007.
The ARJ21’s failure to win regulatory approval almost four years after the first aircraft was assembled may hamper Comac sales as customers can’t be sure when they will get planes, said Ken Zhang, a Beijing-based analyst with Founder Securities Co. The delay may also disrupt development of the larger 168-seat C919, which will compete with revamped Boeing and Airbus aircraft in a domestic market that may more than triple by 2030.
“It’s only logical for customers to slow orders when they don’t know when delays will be resolved,” Zhang said. “The problems just show that challenging experienced players is always easier said than done, especially in aerospace.”
Comac has 206 orders for the ARJ21, predominately from state-controlled companies in China. Of that tally, only 35 have been won since 2008, when the aircraft made its maiden flight. The plane, which competes with Bombardier Inc. (BBD/B) and Embraer SA (EMBR3) aircraft, has General Electric Co. (GE) engines and a maximum range of 2,225 kilometers (1,382 miles) for the standard model, according to Shanghai-based Comac’s website.
Chengdu Airlines Co., which is part-owned by Comac, is due to be the first operator of the regional jet. The carrier doesn’t know when it will begin to receive planes, said a spokeswoman, who declined to give her name. Deliveries are unlikely to start before the second half of next year, said David Wei, an analyst with Shanghai Securities Co.
“The delays for the ARJ21 highlight the difficulties in getting certification,” he said. “The C919 delivery schedule may also be too tight.”
Comac isn’t alone in suffering delays in developing new planes. Boeing this week delivered its first 787 to All Nippon Airways Co. three years late. Airbus postponed the handover of its A380 superjumbo by almost two years. Singapore Airlines Ltd. (SIA) received the first in 2007.
Comac expects the C919 to make its first flight in 2014 and to enter commercial service two years later. The planemaker has won as many as 100 orders for the aircraft and it will announce “substantial” new deals this year, Chen Jin, its general manager for sales and marketing, said last week.
Approval for the ARJ21 may be taking longer than expected because it is the first time that Comac has built a jet plane and the first time that the Civil Aviation Administration of China, or CAAC, has had to certify one, said Wei and Feng Fuzhang, a Beijing-based China Securities Co. analyst.
A high-speed train accident in July, which killed 40 people, and a Chinese-made propeller-aircraft crash in May in Indonesia that killed 25 people may also have made the regulator more cautious, said Founder’s Zhang.
“The recent train crash is a setback for China’s hi-tech manufacturing,” he said. “The CAAC may be even stricter with the new plane now.” Two phone calls to the aviation regulator yesterday went unanswered.
The process of winning approval for ARJ21 from the Chinese regulator and the Federal Aviation Administration in the U.S. are running “smoothly,” said Comac’s Tian. “It’s normal for there to be some technical issues, but so far there haven’t been any disruptive problems,” he said. He declined to elaborate.
The experience Comac and the regulator gain from certifying the ARJ21 may mean that they can more quickly process the C919, said China Securities’ Feng. Comac may also now be more focused on the C919 than the ARJ21 as it’s a more important product for the company, he said
The ARJ21 has so far undertaken tests in cross winds, high temperatures and high humidity, said Comac’s Tian. He declined to say how many other stages the plane needs to complete. At least four planes have been used for tests, according to Comac’s website. Stall tests began late last year, according to People’s Daily.
The delays for the ARJ21 may disrupt Comac’s plans to win overseas approval for the C919 as the FAA is refusing to work on assessing the larger plane until the first one wins certification, aerospace magazine Aviation Week & Space Technology reported earlier this month, without saying where it got the information from. If the C919 advances much further without the regulator’s involvement, the FAA may decide it can never become involved, the report said.
The FAA is working with the Chinese regulator on the ARJ21, said Les Dorr, a spokesman for the Washington-based regulator. He declined to comment on the C919 saying that the agency doesn’t discuss certification efforts in detail.
Overseas suppliers for Chinese aircraft are also helping in the regulatory process. For instance, Honeywell International Inc., which will make parts for the ARJ21 and the C919 through local ventures, has worked with partners on approval processes, said Mark Howes, its Asia-Pacific aerospace president.
“There’s always great interest from the perspective of our partners to learn more about certification with the FAA,” he said.
Boeing and Airbus are working on new versions of their single-aisle aircraft that will compete against the C919. Toulouse, France-based Airbus will introduce the A320neo in 2015, while Boeing plans to begin deliveries of the 737 MAX two years later. Both planes will feature new engines that will help cut fuel usage.
Boeing expects China to take delivery of 5,000 new planes, worth $600 billion, through 2030. The nation’s airline fleet will total 5,930 planes that year, with about 70 percent of the planes being single-aisle models, according to its forecast.
“I think the market is big enough for everybody to play,” said Ihssane Mounir, Boeing’s senior vice president for sales & marketing in Greater China and Korea. “People want to move around, people want to get together, so there will be plenty of business for everybody.”
Comac’s ability to grab a significant share of the domestic and overseas market may depend upon whether it can stick to its delivery plans and how quickly it can get its aircraft into service.
“The ARJ21 will eventually get the certification,” said China Securities’ Feng. “But, it’s clearly true that Comac was far too optimistic in setting schedule.”
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