TCS Daily


Boeing, Airbus: Prepare for Turbulence

By Evan Sparks - July 6, 2007 12:00 AM

On the apposite date of July 8, Boeing will unveil the first assembled 787, its long-expected widebody jet. But with so much attention on the Boeing's heated competition with Airbus, new developments in aerospace are slipping by unnoticed—especially in emerging-market countries like China, where some of this century's big aviation action may well take place.

Later this year, the Chinese state-owned company ACAC will unveil China's first "homegrown" commercial jetliner: the ARJ21, a regional jet seating 70-100 with a range of 1,800 miles. When the ARJ21 takes flight, it will be for China a prouder moment than the 787's unveiling will for Boeing. China's aerospace ambitions are bigger than the ARJ21, and they may have big global consequences.

The weeds of nationalism grow well in aviation's garden. As a source of national pride, commercial air service represents one of the last bastions of resistance to globalization.

The Soviet Union set the standard for a nationalistic aviation sector. Its state-owned and -run companies produced military and civilian aircraft at the direction of the state. Aeroflot used only Soviet-produced aircraft—many of which had poor fuel efficiency, were extremely noisy, did not meet Western safety standards, or had sub-par engines. The Soviets were also notable for exporting their aircraft to their client states worldwide. One could find Soviet planes from Cuba to China, from Angola to Azerbaijan. Through its worldwide ideological empire, the Soviet Union found a ready market for its "homegrown," poor-quality aircraft.

We should not worry—yet—that China's planes will surpass the technical achievements of Boeing and Airbus. China's new jet will enjoy up-to-date engineering, but its engines, flight control system, and avionics will be U.S. imports. China hopes to market the ARJ21 internationally, but for now, only Chinese airlines have ordered it. According to China Daily, ACAC expects its plane to eventually control up to 60 percent of the domestic Chinese market for its size. The rapidly growing Chinese aviation sector has aerospace companies worldwide licking their chomps, and the China's own aerospace ambitions will cool foreign competition there.

Also of concern is China's growing network of virtual client states, especially in Africa, Southeast Asia, and Latin America. Mauro De Lorenzo, a resident fellow at the American Enterprise Institute, has identified China's strategy in Africa as "trade, investment, and aid." China trades for much-needed raw materials, especially oil. It also invests, backing commercial ventures in developing countries and sponsoring infrastructure projects like railroads and refineries in Angola and pipelines in Sudan. Finally, China ties foreign aid to countries welcoming commercial projects and rewards allies with visits by top Chinese officials such as President Hu Jintao and Premier Wen Jiabao.

While international trade rules prevent China from forcing any airline (even a Chinese carrier) to buy its products, it is not hard to imagine what countries like Venezuela and Angola (the beneficiaries of billions of dollars in Chinese investment in their oil industries, to name only two) might do when their flag carriers are faced with a choice between a signature Chinese jet and, say, a Boeing. The recipients of Chinese largesse tend to have state-dominated aviation sectors, meaning that government intervention on behalf of friendly industrial agents like ACAC would not be difficult.

China has bigger plans than a regional jet. It hopes to build a homegrown jumbo jet by 2020 and become a global competitor to Boeing and Airbus. But we should be wary of China's ambitions. Unlike Boeing and Airbus, ACAC and other Chinese aerospace companies are likely to be centrally managed by Beijing. And through its foreign activities, it has not only a huge domestic market but also a network of global buyers who would need little soft persuasion to buy a particular plane, lest the supply of Chinese money be shut off.

One of the reasons Boeing chose the moniker 787 was that this plane was to be heavily marketed in Asia, where eight is thought to be a lucky number. When the 787 rolls out on July 8, it will remind audiences that China is trying its own luck in aerospace. With its own global market, China's luck might be quite good—something for both Boeing and Airbus to keep in mind.

Evan Sparks is an editorial assistant at the American Enterprise Institute.


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10 Comments

Chinese quality
What evidence can you provide to suggest any commercial aircraft will meet the quality standards of Airbus, Boeing, Bombardier or Embraer?

air sick
It's a learing curve that they're still way behind on. Even re cars, I predicted that the US would see Chinese cars within a few years; now it looks like 2009, maybe, and they'll be a couple steps better than Yugos, not not top notch. Aircraft are a whole other order of magnitude re hil-tech. The Chinese have never designed jet aircraft of original design, but russian copies. Sure they're smart, but it will take a long time till they can compete in the same market as Boeing, airbus, etc. They're still backward on most stuff for the next 20 years or so.
Indeed, even though the Chinese invented porcelin centuries ago, had a monopoly for a long time till the Germans in Meissen broke the code and figured out how to do it; still today, I recently knew a german guy who was a highly paid consultant, a refactory engineer, who had to constantly go into red china, and taiwan, and sort them out re making the very same porcelin that they invented centuries ago. Chinese aren't too good re quality control yet. They're not like Japs. It takes a lot to overcome that with them. They think as long as something more or less works, then OK, but for finicky western standards, that ain't good enough.

The Question Of Chinese Quality?
I frequently buy products made in China at my local Wal-Mart. Products made in China are cheap, but don't normally last long. Chinese manufacturers often use poor quality material. As a matter of fact, the products made in China are typically inferior to products made in any other country.

Who in the heck would buy a ticket for a ride in a jet made in China? Only the cheapest skinflint airline customers would pay for a ride in a Chinese jet, and then only if the Chinese jet offered the lowest ticket price of any competitor!

not yet - - -
The Chinese have huge potential to better themselves and the rest of the world, as they are now doing in a somewhat bass-ackward way. Chinese people prosper wherever they are, except in China, because they have not yet been able to oust their anachronistic dictatorship, in favor of personal liberty and a truly free market. When that day comes (perhaps one renegade province at a time) it'll be a great new world for them and for us.

The author's concern is widely misplaced, Boeing and Air Bus, unfortunately, can disregard this "compeitition". They, and we, would be better off if these near-monopolies would actually get some stiff competition.

The West, which includes Taiwan and Japan, should constantly denounce China's ongoing human rights depredations and encourage and help democratic dissidents inside and outside of China.

At least 4 competitors
Airbus and Boeing have significant competition from Bombardier and Embraer in the regional jet competition.

Market forces have directed the need for large, long range aircraft. With a limited market, how many A380s will Airbus have to sell to make money?

Certainly the Chinese people have proven their capability, just as the Koreans have done. It is not the people or culture, it is the government which constrains or enables their capability that is important.

Wasn't too long ago people were saying the same thing about Korean products
And before that Taiwanese and Japanese.

How about Russian products?
I have no doubt the people of China have the capability of producing world class products.

I question whether they can do so under the control of a communist government.

yes and no
some of their military hardware was the best in the world.

The stuff being made for the elite (where there were consequences for failure) were very good.

The rest was crap.

As for China, it's a mixed bag. The communists have relaxed their control in many areas of the economy. Those areas have boomed. Whether they communists will be able to resist re-inserting control as the population becomes more restive and as the rewards from graft become greater, we will have to see.

template copying
Chinese way of "design": Buy something in the west, take it apart, and duplicate each component part as best you can.
Fit the copies together and see if it works.

Japan, Taiwan, S. Korea did the same thing in the early days.
the trick will come when they are done playing catch up, can they start producing unique products on their own.

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