Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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- IAM rejects Boeing contract, strikes at midnight September 13, 2024
- Critical labor contract vote for Boeing, IAM 751 today September 12, 2024
China short on re-engine orders, but nearly 400 C919 “commitments”
The Chinese government and airlines have very few orders for the re-engined Airbus A320neo family and Boeing 737 MAX. There are no identified Boeing 737 MAX orders in China and just 19 A320neos.
There are 197 Unidentified MAX orders, some of them rather large. China in the past has placed large Unidentified orders with Boeing that remained so categorized for years, but there is no way to tell if this is the case right now.
Nor has China placed any orders for the Bombardier CSeries despite growing commercial ventures between Bombardier and the C919 developer, COMAC.
But China has nearly 400 orders and commitments for the home-grown C919 and another large number for the home-grown, and immensely troubled, ARJ21 regional jet. The validity of the C919 orders is questioned by some observers, and even some of those who “ordered” the C919 tell us the orders are window-dressing for China.
Still, the question remains: why hasn’t China placed orders for the MAX and CSeries or larger orders for the NEO?
For the MAX, it has been suggested to us that given China’s historical adherence to ordering within a Five Year Plan, the MAX entry into service of 2017 was initially beyond the five years of the 2011 launch date. Now, with a backlog of some 1,500 MAXes, the line is essentially sold out to 2019 or so–though Boeing is well known to hold some delivery slots back for key customers, as well as to double-book and hope to then manage its “skyline” accordingly.
(Boeing’s considering a plan to increase 737 production rate to 47 a month by 2017 and 52 a month by 2019 which will clearly help skyline management issues and offer new slots to customers.)
Airbus has an A320 assembly line in China’s Tianjin, erected with the strategy that this would enable Airbus to increase its market share within China. This seems to have worked: the A320 is selling well and has a healthy backlog in China. But only 19 A320neos have been sold and none for the A319neo or A321neo.
The Five Year Plan could have a bearing on this, if this theory is correct. The A320neo has an EIS of October 2015, with the other two models following by six months and one year. With the initial runaway success of the neo, early delivery slots disappeared quickly. Still, one might expect the Tianjin plant would assure delivery slots to China for the neo. So to some degree the absence of neo orders is puzzling.
Unless it all comes down to the government supporting the C919 to the exclusion of the 737 MAX and the neo. This seems plausible.
Why hasn’t Bombardier received orders for CSeries, given its commercial ventures with COMAC and the announced plans to share a cockpit with the C919? An order from the China Development Bank was expected at one of the international air shows a few years ago, but we are told the CDB board of directors held off at the last minute due to internal issues. CDB has since ordered the C919 and ARJ21, but nothing from any Western OEM.
Still, the absence of orders from a commercial partner is disappointing but hardly unprecedented. Consider the MD-80/90 assembly line in Shanghai that was supposed to lead to large market penetration for McDonnell Douglas. In the end only a handful of MD-80s/90s were sold in China. Or consider the ERJ assembly line that was established for the same goal, only to prove a disappointment to Embraer.
The Chinese are fickle
The major airlines in China currently have a fleet of over 1000 A320s and 737s. The hundred or so C919s on order will not be enough for replacement and growth. I don’t imagine the airlines are rushing to order the C919 – they will have to pick up the depreciation charge on them as well as deal with any teething problems with the plane. But they will have to take some in the mix, which will certainly include more A320s and 737s
It’s probably worth pointing out that the C919 has a very large number of orders from leasing companies and rather few from actual airlines. The leasing companies are owned by Chinese State-run banks. My guess is that Chinese banks are more susceptible to Government pressure than airlines.
Intriguing Topic. From your earlier comments it seems the C919 project isn’t progressing as well as hoped. Maybe an opportunity for BBD if they are called in for their fresh integration knowledge.
I don’t have the details anymore, but wasn’t the Tianjin FAL up for renegotiating? It seems the C919 hick ups and Mobile line strenghten Airbus’ position in asking the Chinese to fill up the Tianjin NEO line in the future. And the demand is there, the NB’s will be delivered in the next 10 years, only question is who will build them and where.
I’m also amazed there aren’t large A321 NEO orders yet. The Last 757s went to China.
http://cdn-www.airliners.net/aviation-photos/photos/6/3/2/1733236.jpg
NB traffic in China could be more limited to fringe connections in the future.
Everything else will be Rail, HighSpeedRail or WB airtraffic ( ordered by increasing distance ).
This would lead towards a more limited demand in new NB passenger planes.
China is actually rather resource and environment concious.
More weight on flying only makes sense in a country that is averse to infrastructure
investment ( also large but sparesly populated).
One has to look out for what kind of developement the Chinese are thinking about:
http://www.ivv.tuwien.ac.at/uploads/media/sustainable_urban_planning_engl_02.pdf
http://www.bahnsysteme.tu-berlin.de/fileadmin/a3533/uploads/Sonstiges/Beitrag_Business_Guide.pdf
probably more around with a bit of search.
A 70m -80m A380 twin-engine derivative aircraft (i.e. A390X) using the wing, engine and MLG of the A350-1000 should fit a Chinese regional VLA market nicely.
Found a recent update on the renewed Tianjin contract.
http://europe.chinadaily.com.cn/business/2013-03/22/content_16334716.htm
Airbus “expects” NEO orders this year.
China is rumored to be joining Russia’s Ekojet widebody medium-haul project, with a design that inherently isn’t hampered by long-haul requirements. Engine may very well be shrouded prop-fan, similar to open rotor. More details supposedly going to be announced at MAKS in a few weeks.
Re Boieng, if the 197 unidentified MAX orders are from China, would this be a low amount or simply a regularly sized first purchase?
Re Airbus, the EU ETS clearly put noses out of joint and I suspect NEO orders will be delayed until the air clears on this.
I do think the Chinese government will push ahead though with doing whatever it can to bring the C919 to market in China and reduce the % of fleet that is Airbus or Boeing.
There are multiple MAX orders from Unidentifieds, not one large one.
I thought it was common sense that plan economies are prone to fail?
I was learned our western system is the best and therfore the rest inferior. Then those non democratic centralists proved very productive and took over most western production. Also advanced technology. Seems they don’t talk so much but create, and very fast too. And they are rich. Confusing.
I no longer give the Chinese the benefit of doubt.
“Took over most Western production” -> not supported by facts
“Advanced technology” -> not mastered in design and manufacturing engineering
“Create, very fast” -> true in some areas for lack of regulation and/or legal restrictions/enforcement. Not obvious to me for integrated, complex engineering products like commercial airplanes and engines.
Chinese capabilities have been exaggerated by certain Western industry quarters to serve as a competitive threat in wage negotiations (“these guys will do it much cheaper”). Look at the facts and you will see that China is a socio-economical and ecological accident waiting to happen.
KDX125 has it 100%…
China is the stalking horse for Western corporations vision of society,
you have neo-cons who explicitly state the US/West should be more like China.
Once China’s limitations and problems are recognized, it’s not a tool to hold everybody by their balls.
Let’s just say their latest regional turboprop MA700 is using consulting from Antonov of Ukraine. Would Antonov have any credibility on it’s own in Western press? Yet China does, even when they rely on Antonov, for a not especially technologically innovative turboprop. Of course, that Antonov/Ukraine are just consulting instead of negotiating production partnership shows how fucked they are, but China is not “all that”. Last I checked, the only price I could find on ARJ21 was NOT any cheaper than what Sukhoi is offering for Superjet, albeit both are cheaper than similar Embraer E-Jets and Bombardier CRJ.
Hint: there’s one “unidentified customer” among the CSeries commitments… Guess who’s that…