Asia Briefing: China aims to fly high in aviation market

Domestic players looking to compete with Boeing and Airbus

 

On some Chinese aircraft, you can hear a recorded Irish accent directing you to your seat on the aircraft, as companies such as Parc Aviation make inroads into the training market.

Aviation is booming in China. Last month, aircraft manufacturer Boeing and China Eastern Airlines celebrated the delivery of the 1,000th Boeing aircraft for China, a 737-800 emblazoned with a bright peacock design.

Boeing chiefs expect China’s commercial aircraft fleet to have grown to 5,980 by the end of 2031 compared with 1,910 by the end of 2011.

Compare this to North America, where the fleet is set to grow to 8,830 from 6,650 over the same period, and you see where the global growth is centred.

Currently, China has to import its commercial aircraft from abroad, and most of the aircraft owned by Chinese airlines must be repaired and maintained overseas.

That could be about to change.

Central to China’s domestic aviation ambitions is the country’s homemade narrow body commercial airliner, the C919. The C919 is a 168-seat, single-aisle, medium-range aircraft designed to give Boeing’s 737 and Airbus’s A320 a run for their money.

After the Zhuhai air show last year, the Commercial Aircraft Corporation of China (Comac) announced that it had received an additional 50 orders for the aircraft, which is due for delivery in 2016, after tests next year. Total orders received so far are 380.

Comac will take a mock-up of the C919 to Aviation Expo China in September at the China National Convention Center in Beijing, and “probably some more C919 orders, but it depends on the business development situations”, Lu Zheng, marketing and sales director at Comac, told local media.

China’s bid to become a player in the domestic aviation stakes is coming on strong, but the real clash of the titans in the country remains that between Boeing and Airbus.

The two aviation giants have very distinct strategies as they gear up for an escalating battle for market share.

Boeing’s 737 Max, a single-aisle plane made by Boeing to compete with Airbus’s A320neo, won more than 900 orders globally last year, giving Boeing top spot ahead of Airbus, in terms of deliveries and orders.

Last year, Boeing predicted that China would need 5,260 new aircraft in the next 20 years, worth $670 billion (€512.5 billion) in terms of orders. And Airbus predicted in March that the global aviation market would need 19,500 single-aisle planes in the next 20 years, with 2,719 needed in China, accounting for 14 per cent of the total.

In March, Boeing China president Marc Allen announced in Beijing that the number of new planes delivered to China this year will rise by 60 per cent to 120 aircraft. But Airbus has a strong position in the Chinese market. According to Airbus, by the end of last February, there were 891 Airbus aircraft in operation on the Chinese mainland, which accounts for a 49 per cent share of the total fleet. In 1995, there were 20 Airbus planes in use in the mainland, and the company’s market share was just 6 per cent.

Both companies have recently installed new China chiefs, with different styles. In March 2011, Boeing China appointed a new president from the US, Marc Allen, whose responsibilities are focused on government relationships and industry cooperation, rather than sales.

Eric Chen, who has been the president of Airbus China since January, is the first Chinese person in that role. He has a sales background. “Now we [Airbus and Boeing] are at the same level, and our market share in China is 49 per cent, which is better than the target we had set,” Mr Chen said in an interview with the Global Times newspaper. “We want to be the leader, not a follower in the next 10 years.”

He said Boeing’s merger with the US aerospace and defence group McDonnell Douglas had given Boeing “a digestion problem”.

Of possible concern to all market players in this fiercely competitive market is the prospect that the number of aircraft seats on offer is not being matched by the number of travellers: the number of seats will increase by 11 per cent this year, but the Civil Aviation Administration of China predicts that the number of travellers will rise by 9.4 per cent.