By Bjorn Fehrm
October 19, 2020, ©. Leeham News: Airbus and Boeing have dominated the world’s airliner market over the last 30 years. In the next 30 years, will this change?
Before the COVID-19 pandemic, the answer was no. The only viable competitor, the Chinese aircraft industry, would need more time to catch up. But the pandemic has changed the dynamics in the world.
For China COVID-19 is history. For the rest of the World not. China’s society and most noteworthy its travel industry are back to normal. September’s domestic flights were 103.5% of 2019 levels and passenger numbers were at 98% while the rest of the world is busy throttling back network plans from already low levels. We know that airlines in China are stimulating traffic with discounted fares, taking losses in the process. However, they have the backing of the government and it is traffic that ultimately drives demand for aircraft.
The Chinese system handles the crisis magnitudes better than the free world. Will the newfound Chinese self-confidence spread to bootstrapping the in-house air transport industry even further to capture the increased airliner demand?
The Chinese airline passenger market became the world’s largest as it passed the US market in April this year. IATA had forecasted this would happen in 2024 but the pandemic brought it forward four years. With China’s domestic market now back to the pre-COVID levels it leads the US with a large margin, now and in the future.
All western airlines are cutting down capacity forecast to new lower levels as the virus catches the North Hemisphere in a second wave. Forecasts now say we will recover in 2024 instead of 2022. It might take longer. Vaccines will now be generally available on a worldwide basis at the end of 2021, not before say the experts. It was early 2021 the last time we asked.
And they might help like the flu vaccines, one season. The immunity might last three months or one COVID season. We don’t know but the first re-infections are there. In short, the scientists are now saying we will live with SARS-CoV-2 for a long time.
While the free world and its travel industry grapple with how to handle this, China’s domestic travel industry is back to normality. The result of all this will be a change in market dynamics. The Chinese market will dominate the demand for new airliners going forward more than before COVID.
Will the Chinese government accept that this world unique demand is filled with Airbus and Boeing airplanes? With new self-confidence from mastering the world’s largest crisis since the Second World War better than any other nation, will it allow this to happen?
China’s leader, Xi Jinping’s policy is to build a China which is a world leader in high technology industries. What is more high tech than civil airliners? Military airplanes. Where China in 20 years has gone from producing Soviet copies with imported engines to fielding the World’s fourth stealth fighter, the J-20, flying with an indigenous engine, the WS-10, and an indigenous phased array radar.
Yes, the ARJ-21 regional airliner took forever to materialize, and it’s a copy of an MD-80 with an Antonov wing. And the C919 is years late. But the C919 has 300 firm orders and 700 options. These orders are not dependent on its fuel economics being better than the Airbus A320neo or Boeing’s 737 MAX. They just depend on the aircraft being certified and produced. China’s government decides what aircraft is sold on the world’s largest airliner market.
If the Chinese industry can deliver, it will get the orders. Performance and reliability just have to be good enough. This will grow the industry and it will finance a second try and a third. Until COMAC can compete on the world market.
China is learning about airliner production and in-field support through the ARJ-21. The three major Chinese airlines now operate the type. Not because it’s the best. Because it’s Chinese. And the government has decided that this is the way for COMAC to expand its knowledge on how to support a type in service.
The Chinese government with its power is bootstrapping COMAC in the field the western industry says will be the hardest learn, airliner operations support. And it will continue to bootstrap its industry in every field necessary until equality is followed by supremacy.
Yes, this is probable. But it will take time was the pre-COVID consensus. A long long time.
It didn’t take a long time for the Chinese to advance to stealth fighters or learn how to handle the pandemic better than anyone else. China is also at the forefront of the vaccine race. Will the focus that produced the world’s fourth stealth fighter or that managed the pandemic better than the free world accelerate the Chinese airline industry much faster than we all forecast?
No-one would have forecasted the US, the world’s richest and medical technology-wise most superior nation, to be the worst hit by a new virus, and China, where it spread first, being the least hit.
Take this analogy to the highest tech civil market and re-evaluate the situation against this background. Yes, Airbus and Boeing are technology-wise, production-wise, and support wise way ahead of the Chinse civil airliner industry.
But their home markets are no longer the world’s drivers for new aircraft, China is. At least for the next five years. Probably as long as we can forecast. Won’t a more confident Chinese leadership use this to surge its air transport industry to a position equal to Airbus and Boeing in record time? And then challenge it?
It’s time to think again.