The End of the Boeing Airbus Duopoly?

For the last few decades, Boeing and Airbus have been the biggest and best known commercial aircraft manufacturers in the world. They each have proven track records and thousands of aircraft that take to the sky each day for a wide array of commercial and private applications. While these firms have struggled to gain complete market dominance, they have largely been unchallenged in the commercial aircraft market, forming a duopoly. Today, this may be changing. The Commercial Aircraft Corporation of China (COMAC) has developed the C919, a direct competitor to both Airbus A320 and Boeing 737 product lines (Cosgrave, 2015).

Although the COMAC C919 is just entering the market, a large hurdle continues to be certification by the Federal Aviation Administration (FAA) which would allow the aircraft to be flown in the United States. I do think that eventually, the C919 will gain FAA certification. The United States has a very large demand for single aisle aircraft like the C919; if it can meet safety standards, it will be approved. However, I also think it will take some time before the aircraft will be certified. The FAA will likely wait to see what kind of operational performance the aircraft has in other countries and in China. After it has a more proven track record and is able to comply with FAA standards, I see the aircraft being certified and flying in the United States. The lack of certification is likely due to the fact that COMAC is a completely new aircraft manufacturer. Thus, the FAA is proceeding slowly and carefully to ensure the aircraft is safe. Ironically, many components on the aircraft are even made by U.S. manufacturers. The electrical, radar, door signal, flight control, fuel, landing gear, flight recorder, fire detection, and auxiliary power systems are manufactured in the United States (Jiang, 2015). Thus, the aircraft is composed of many reputable components from reputable manufacturers. FAA certification will simply depend on whether COMAC can assemble the components to create a safe and reliable aircraft. If the aircraft in its current state does not meet FAA standards, I think COMAC will retrofit the C919 so that it will eventually gain certification.

Assuming the C919 is certified, the problem for U.S. carriers will likely be public perception. Many Americans have a very poor regard for Chinese manufacturing and quality, regardless of the high quantity of goods manufactured there. Thus, I feel that many passengers may be reluctant to board an aircraft that was built by the same country who uses lead paint and poisonous chemicals to produce cheaply made products. Not to mention the fact that the aircraft is new, COMAC is new, and there really isn't a track record of safety for the aircraft or manufacturer. U.S. carriers may also face greater pressure when purchasing aircraft. Traditionally, the choice has been Airbus, Boeing, and other well known manufacturers, like Bombardier and Embraer. With the C919, carriers will have yet another option. Complicating the situation is the relatively cheap price for the C919; rumored to be somewhere around $50 million, which is far cheaper than equivalent Boeing and Airbus products (Johnson, 2015). This could strain the monopolized relationships between major air carriers and the legacy manufacturers. If U.S. carriers were to purchase the C919, it would almost be a guilty pleasure for them. The cost savings have the potential to be astronomical, yet at the same time public perception and manufacturer relationships may be at stake.

Entering the market on May 11th, 2008, COMAC is owned by the Chinese Government and consists of various Chinese aerospace and manufacturing companies ("About," n.d.). The overall goal of the company is to develop a commercial aviation manufacturing industry in China. In other words, it is China's turn to compete in the international commercial aircraft manufacturing market, and COMAC will be leading this charge. With well over 500 orders, the C919 will be flying mostly for airlines owned by the Chinese Government. This certainly suggests a conflict of interest; a Chinese aerospace manufacturer owned by the government will be producing aircraft primarily for airlines also owned by the Chinese Government. Thus, the aircraft has virtually no orders from the rest of the aviation world. This is likely due to the fact that COMAC remains untested by time, and air carriers have little experience with entirely Chinese produced aircraft.

COMAC is also rumored to be exploring the possibility of entering the wide-body aircraft market with the C929 aircraft, which would compete with the Boeing 747 and Airbus A380. What isn't speculation, however, is the COMAC ARJ21 aircraft. The aircraft is smaller, seating only 78 passengers ("ARJ21," n.d.). Essentially, the ARJ21 is COMAC's version of a regional jet, designed for shorter hops in the hub and spoke system. First delivery of this regional variant was scheduled for 2007; as of 2012, no ARJ21 aircraft have been delivered (Chang, 2012). Nonetheless, this aircraft will also allow COMAC to compete with Embraer, Bombardier, and other regional jet manufacturers. Now the only aircraft category COMAC is missing is wide-body.

As COMAC enters the market, I do not think it will encourage other manufacturers to follow suit. To clarify, COMAC is really not a competitor to Airbus or Boeing today. Their 517 C919 orders are largely derived from the Chinese Government, which also owns the airlines. Furthermore, COMAC is lacking the immense experience Airbus and Boeing have been building on for decades. As soon as COMAC reaches the current development level of the legacy manufacturers, they will likely be 25 or 50 years behind already (Cosgrave, 2015). The company has already suffered severe budget and delivery issues with the ARJ21 aircraft (Chang, 2012). I do not think COMAC will be able to catch up or produce a product that is superior in quality, reliability, and performance to Airbus or Boeing. I think aircraft manufacturers looking to expand into the commercial aircraft market in the shadow of COMAC will see this extreme disadvantage and remain clear of the market.

Airbus and Boeing have continued to improve upon their 737 and A320 product lines, but it is unclear if COMAC inspired the latest product developments from these manufacturing giants. Boeing, for instance, will be revealing the 737-Max, which will boast improvements in fuel efficiency and passenger comfort. Similarly, Airbus will be refreshing the A320 line with the A320neo, which will feature more fuel efficient engine options as well. I do not think these developments were designed to compete with COMAC, but instead to remain competitive in general. It will be interesting to see when the C919 is certified by the FAA and how the market will respond.

References

About us. (n.d.). Retrieved from http://english.comac.cc/aboutus/introduction/

ARJ21. (n.d.). Retrieved from http://english.comac.cc/products/rj/

Chang, G. (2012, November 25). China's aiation ABCs: Airbus, Boeing, and COMAC. Retrieved from http://www.forbes.com/sites/gordonchang/2012/11/25/chinas-aviation-abcs-airbus-boeing-and-comac/#2d23107d1048

Cosgrave, J. (2015, November 9). Is China a real threat to Boeing and Airbus? Retrieved from http://www.cnbc.com/2015/11/09/is-chinas-first-plane-a-real-threat-to-boeing-and-airbus.html

Jiang, S. (2015, November 2). China to take on Boeing, Airbus with homegrown C919 passenger jet. Retrieved from http://www.cnn.com/2015/11/02/asia/china-new-c919-passenger-jet/

Johnson, P. (2015, December 17). Competition for Boeing as COMAC's C919 is the new kid on the block. Retrieved from http://www.forbes.com/sites/pierrjohnson/2015/12/17/competition-for-boeing-as-comacs-c919-is-the-new-kid-on-the-block/#7f5adcb66c1a