Western aircraft duopoly challenged by new Sino-Russian partnership

When Russia announced plans last month to jointly develop a mid-size passenger jet with China, it was a warning to the western duopoly of Airbus and Boeing that an east versus west battle for future aircraft sales is coming sooner than western manufacturers expected.

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

November 1st 2015

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It was a bolt out of the blue. On September 21, two days before Chinese President, Xi Jinping, visited Boeing’s production lines in Seattle, news came from Moscow that Russia and China were on the verge of signing an agreement to jointly develop a wide-body jet. Read More »

The pending deal meant Russia and China intended to work together on an aircraft that would compete with Airbus and Boeing wide-body airplanes, the country’s deputy industry minister, Andrey Boginsky, told reporters. He added he expected an accord to be signed by the end of the year.

China’s first short to medium haul single aisle jet, the C919, was rolled out in Shanghai on November 2, with its maiden flight expected early in 2016

Boginsky’s announcement was a significant development in the global aircraft manufacturing industry. Until now, China has focused on its new single-aisle jet, the C919, which is being built by the Commercial Aircraft Corporation of China (COMAC) and is aimed at competing with the A320 and the B737. There have been several delays to the C919 launch, but it is scheduled to fly for the first time next year.

Both Boeing and Airbus have publicly acknowledged China will become a major competitor and have said they are happy to compete with whoever comes along. Most industry insiders estimated it would take as long as 20 years for China to reach that point, but a joint push from Russia and China could bring forward that calculation significantly.

Boginsky said COMAC and Russia’s United Aircraft Corporation (UAC) would be the project’s partners, with an ambit that could include the development of an aircraft engine, calculated to cost $20 billion.

Speaking in Beijing at the recent Aviation Expo China 2015, the president of UAC, Yuri Slyusar, said the agreement would specify each country’s responsibilities and profits from the project.

“So far, the project has proceeded well. We plan to determine the technical requirements, specifications and outsourcing methods by March,” he said.

“The new jetliner is totally different from the C919 in passenger volume and flight range. It is aimed at different markets, so they will not compete with each other,” he said. “The planned airplane would accommodate between 210 to 350 passengers, depending on the configuration.”

Russia had floated a proposal with China for a jointly developed wide-body jet in 2012, but the Chinese government and COMAC appeared uninterested. But last year COMAC signed an initial cooperation memorandum with UAC and began preliminary research on the project.

It is reported China will manufacture the fuselage main frame and Russia will be responsible for the wings and tail parts. Both countries are said to want to hasten the development of the aircraft with a view to breaking up the Airbus-Boeing duopoly.

While it will be years before the project produces a saleable aircraft, it should have plenty of buyers, not only in China and in Russia, but beyond. The Aviation Industry Corporation of China’s (AVIC) outlook for civilian aircraft demand for the next 20 years estimates 37,900 passenger aircraft will be required globally, with China needing more than 5,500 passenger planes.

China is increasing its efforts to transform China into a major global aerospace power and not just in the big commercial jet sector. Last month, AVIC and the local government of the central Chinese province of Hubei began building the first of many industrial complexes dedicated to serving the country’s expanding general aviation market. The $3.1 billion investment will sprawl across 30 square kms of Hubei’s Jingmen City .

AVIC chairman, Lin Zuoming, said the facility should be completed by 2023 and will be dedicated to building aircraft and conducting research and training. “AVIC will construct 50 such complexes in China to cover 90% of the country’s population in order to build a national light aircraft operation network,” he said.

In the meantime, Airbus and Boeing are increasing their investment in China. In Seattle, president Xi not only announced China would buy 300 Boeing airliners. He said the U.S. aerospace company and COMAC would become partners in a B737 completion and delivery center in China and added existing long-term collaboration between Boeing and AVIC would be broadened.

The Boeing partnership came days after Airbus said its new A330 completion and delivery centre in Tianjin, where it has an A320 final assembly line, would create 250 to 300 jobs in the port city when it opened in late 2017.

Philippe Pezet, vice-president for human resources at Airbus Group China, said many staff will move over to the new plant from the existing A320 aircraft final assembly line and that only 10% of the workforce would be expatriates.

The A330 center will differ from the A320 aircraft final assembly line by concentrating on cabin equipment, which is more complex than the A320, painting, test flights and delivery, Airbus said.

The Boeing order, worth $38 billion at list prices, consists of 250 narrow-body B737s and 50 wide-bodies (not identified, but believed to be mostly B787s). Leasing companies, ICBC and CDB Leasing, will receive 60 of the B737s.

“Boeing airplanes have played an important role in supporting the development of China’s aviation transportation for the past 40 years,” said Li Hai, president of China Aviation Supplies Holding Company, through which all commercial aircraft for China are ordered. “These additional airplanes will help connect people in China and around the world.”

Boeing president and chief executive, Dennis Muilenburg, said Boeing appreciated China’s continued trust and confidence. “Today’s visit by president Xi represents a new chapter in the valuable relationship between Boeing and China. Boeing is committed to strengthening and deepening our partnership with China in mutually beneficial ways that will bring positive outcomes to Boeing and our Chinese partners,” he said.

While in Seattle, president Xi viewed final assembly lines for the 787 Dreamliner, 777 and 747-8, as well as aircraft components made by Chinese aviation suppliers. He spoke with Boeing employees and the 787 chief pilot about their work on aircraft built for Chinese carriers.

Commenting on the new 737 completion plant, COMAC vice president, Wu Guanghui, said the collaboration “will help advance the Chinese commercial transportation market in a better and faster way and will benefit the development of supporting Chinese industries related to aircraft completion as well as the global growth of China’s civil aviation business”.

Boeing, COMAC and Chinese government officials are working towards a final business agreement and will announce the facility’s location, and the timing of first deliveries, at a later date. Boeing, now producing a record 42 737s per month, will increase production to 47 airplanes per month in 2017 and 52 airplanes monthly in 2018 to meet demand for the aircraft type.

Boeing dismissed claims by its Machinist union members and some politicians (including Presidential candidate, Donald Trump) that American jobs would be lost because of the new centre in China.

It pointed out that while orders from China are large they make up a small percentage of the backlog of 5,710 aircraft Boeing has on order. Muilenburg said he saw scope for additional 737 work going to China as the company continued to increase production rates, though any changes would not come at the expense of U.S. jobs.

“As we ramp up capabilities in China, including additional 737-related work, the actions that we will take are actions that will allow us to grow jobs here in the U.S,” he said.