Singapore Airshow: Can China dominate aircraft manufacturing?

A model of C919 on display China is looking to target the fast-growing market of single-aisle aeroplanes with the C919

The Chinese have a saying: "Nothing is impossible to a willing mind."

They have proven it over the years, especially on the world business stage, with Chinese companies becoming dominant global players in various sectors.

Now, they are facing their toughest test.

China has set its sights on commercial aeroplane manufacturing - a sector that has arguably more hurdles and stumbling blocks than any other.

"The barriers to entry in commercial aircraft manufacturing are extremely high, and they are not just technological," says Richard Bitzinger, a senior fellow at S Rajaratnam School of International Studies.

Tough competition

The state-owned Commercial Aircraft Corporation of China (Comac) is the one tasked with helping Beijing break into the sector.

Start Quote

Comac is up against one of the world's strongest duopolies”

End Quote Richard Bitzinger S Rajaratnam School of International Studies

Set up in 2008, the firm is betting on its C919 aeroplane - a narrow-body, or single aisle plane that can seat up to 168 passengers - to be its launch pad.

The company is targeting the segment as the market for 100 to 200-seat single-aisle planes is forecast to be worth $20 trillion (£12.8tn) over the next 20 years.

A large part of that growth is expected to come from Asia, and Comac is looking to attract customers with its presence at this week's Singapore Airshow.

However, it is up against stiff competition. The sector is dominated by Airbus's A320 and Boeing's 737, which have received more than 10,000 orders each.

Airbus A320 The A320 can seat 150 passengers in a typical arrangement and up to 180 with high-density seating
Boeing 737 The 737 is Boeing's best-selling plane, with more than 7,500 jets already delivered

"Comac is up against one of the world's strongest duopolies," says Mr Bitzinger. "Airbus and Boeing produce nearly every 100-seat-and-above passenger jet flown by nearly every airline in the world."

Other firms are also eyeing the sector. Bombardier's much-anticipated C-Series aircraft is seen by many as the most serious potential rival to Airbus and Boeing in the segment.

As that plane gets ready to enter commercial service, it is likely to become even tougher for Comac to break in.

Quality control

Start Quote

When it comes to aeroplane manufacturing, perception is everything”

End Quote Shukor Yusof Standard & Poor's

Perhaps an even bigger hurdle is winning the trust of customers that it can build a reliable and safe plane, not least because hundreds of lives are at stake every time a plane is airborne.

Planes are highly complex machines. Thousands of parts need to be fitted and integrated together for them to function properly and any faults can create serious problems.

This is where, analysts say, China's reputation over safety issues may prove to be a stumbling block.

"There is a perception that China doesn't have strict quality control," says Shukor Yusof, an aviation analyst with Standard & Poor's.

"Whether that is justified in this case, we don't know. But when it comes to aeroplane manufacturing, perception is everything."

Shivaji Das, an aviation analyst with consulting firm Frost & Sullivan, adds that previous quality control scandals in other sectors such as baby formula have contributed to such concerns.

Beta tester?

Many of the key components for the plane, including its engine, are being supplied by foreign firms.

Its suppliers include GE, Honeywell Aerospace and Rockwell Collins. Comac has also agreed a technical collaboration with Bombardier.

That should help allay some concerns over quality control.

The LEAP engine by SAFRAN Snecma selected by COMAC for the C919 The engine for the C919 will be provided by CFM International - a joint venture between Snecma and GE

However, analysts say that eventually the parts are being put together at local facilities and Comac's inexperience in doing so may worry some customers.

The fact that Comac has delayed the first test flight of the plane has not helped.

"No-one wants to be a beta tester of a new aircraft, especially from a manufacturer with little or no prior experience," says Mr Bitzinger.

"There are many things that can go wrong with a new plane and as an airline you need to feel assured the manufacturer has the resources and capability to sort it out quickly."

Even Boeing and Airbus - with decades of experience - have faced problems with new models.

Start Quote

If the plane performs well over time, with no major problems, you can't rule them out from having a serious shot on the global stage”

End Quote Shivaji Das Frost & Sullivan

Boeing's 787 Dreamliner has had problems with battery fires, while Airbus's A380 saw hairline cracks appear on some of the brackets used to link the wing to the plane.

Domestic boost

The one thing going in favour of Comac is that it does not need to rely on global orders, at least not yet.

China is one of the world's fastest growing aviation markets and is likely to see big demand for single-aisle planes over the next two decades.

Comac has already got 400 orders for the C919 - mostly from China - and the number is expected to rise further.

"They are likely to get some sort of a protected access to the domestic market," says Mr Das, of Frost & Sullivan.

He adds that starting out in the domestic market is likely to benefit Comac.

"It's their home turf, so safety and quality concerns are likely to be less of an issue," he says.

"And if the plane performs well over time, with no major problems, you can't rule them out from having a serious shot on the global stage," he adds.

International Airlines Group (IAG), the parent company of British Airways and Iberia, is already talking to Comac about future aeroplane needs.

A turbulence-free take-off in China may well ensure a smooth landing in those markets.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Business Live

  1.  
    12:23: FCA review

    Banks may be forced to compensate some customers after failing to meet standards on selling complex investment products, the Financial Conduct Authority (FCA) has said in a review of the sector. Structured products range from alternatives to cash deposits to complex investments linked to multiple financial assets or indices. Some firms assessed by the watchdog have been asked to determine if customers were harmed.

     
  2.  
    12:08: Interest rates

    Martin Beck, senior economic adviser to the EY Item Club, says the next rate rise could be almost a year away. "While the risks of an earlier rate rise have probably increased lately, we still think it most likely that the Bank will wait until February 2016, by which time inflation will be back above 1% and heading towards the 2% target."

     
  3.  
    Bank holds interest rates 12:00: Breaking News

    That's it: six years of interest rates at 0.5%. The Bank of England, in the least surprising move of all time, has left rates unchanged - and neither has quantitative easing been altered.

     
  4.  
    11:43: Aer Lingus
    Aer Lingus

    The Irish government expects BA owner IAG to sweeten its €1.36bn offer for Aer Lingus to convince it to sell its 25% stake in the airline. Deputy prime minister Joan Burton said the transport minister anticipated "further offers forthcoming from IAG".

     
  5.  
    11:30: Mikhail Fridman

    David Cameron's spokesman says the PM "entirely backs" the seven-day deadline to decide the fate of Russian oligarch Mikhail Fridman's newly acquired North Sea assets. He added that the government was ready to act if assurances were not received.

     
  6.  
    11:22: TSB pay
    Paul Pester

    TSB has revealed its chief executive Paul Pester (pictured) received a salary and bonuses totalling just shy of £1.9m last year. As a comparison, Barclays boss Anthony Jenkins was paid £2.3m last year. TSB listed in London last June - although its shares are 10% below the float price at 260.1p.

     
  7.  
    11:06: Car sales up in February

    Staying on a car theme, UK new car sales rose 12% in February, says the Society of Motor Manufacturers and Traders (SMMT). February car sales totalled 76,958, taking sales in the first two months of 2015 to 8.3% overall. Sales rose by nearly 10% last year, their highest rise in a decade, the SMMT said in January.

     
  8.  
    10:49: Aston Martin at Geneva
    Aston Martin Vulcan

    Do you like Aston Martins? Of course you do. In which case you really ought to take a look at its new car, the Vulcan.

     
  9.  
    10:35: Cold homes
    fireplace

    The health watchdog NICE - the National Institute for Health and Care Excellence - is calling on plumbers and heating engineers, as well as family doctors to sound the alarm if people in England are living in homes that are too cold. The aim is to reduce the higher level of deaths in winter.

     
  10.  
    10:19: Greek unemployment
    A man walks by greek flags for sale

    Greece's jobless rate rose to 26% in December from 25.9% a month earlier as the economy shrank slightly in the last quarter of 2014, statistics agency ELSTAT says. That's the lowest unemployment rate since September 2014 and now quite a bit below the record high set in September 2013, when unemployment hit 27.9%.

     
  11.  
    Mobile World Congress Via Twitter
    BBC

    BBC technology correspondent Rory Cellan-Jones tweets: From the Ubuntu phone to VR headsets find all our coverage by choosing mobile phones topic in BBC news app @BBCRoryCJ

     
  12.  
    09:42: Zalando expansion
    Zalando

    Watch out Asos... Zalando, Europe's biggest online-only fashion retailer, plans to hire 2,000 new staff as it aims for sales growth of 20% to 25% this year. It is considering setting up local distribution hubs in Britain as well as Italy, Spain and the Nordics to complement its existing warehouses in Germany. Frankfurt-listed Zalando is worth almost €6bn (£4.3bn); Asos is valued at £2.7bn.

     
  13.  
    09:24: House prices

    The current figures may be slightly deceptive however. Halifax says prices rose by 2.6% in the three months to February, compared with the previous three months. Its housing economist, Martin Ellis, says a modest rise in activity reflects increases in real earnings and spending power, recent falls in mortgage rates and changes to stamp duty.

     
  14.  
    09:10: House prices
    Sale and Sold signs

    House price in February were 8.3% higher than the same month a year ago, according to the latest Halifax figures, falling back from 8.5% rise last month and a peak in July of 10.2%. Compared with January prices were 0.3% lower. The average house now costs £192,372, Halifax adds.

     
  15.  
    08:57: Market update

    London's FTSE 100 Index is up 0.14% at 6,929 as traders wait for more details of the European Central Bank's bond-buying programme to be released later today. Aviva shares have jumped this morning after it raised the dividend by 30% on a strong set of annual results.

     
  16.  
    08:44: Carrefour results
    Carrefour

    Carrefour - the world's second-largest retailer after Walmart - plans to spend about €2.5bn (£1.81bn) on revamping stores in 2015 - the final leg of a three-year turnaround plan. The French group could also go ahead with an IPO of its business in Brazil - the supermarket chain's second-largest market - if conditions remain favourable. Operating profits came in at €2.38bn for 2014.

     
  17.  
    Via Twitter Radio 5 live

    Sean Farrington tweets: On Wake Up to Money's podcast today...After 6 yrs of low interest rates, where could you have got good returns? @seanfarrington

     
  18.  
    08:25: Virgin Money
    London marathon

    After listing in November, the challenger bank is set to be admitted to the FTSE 250 later this month. Its shares are up 13% to 327.5p, valuing it at £1.4bn. Virgin Money, which sponsors the London marathon, said today that underlying pre-tax profits rose 127% to £121.2m for 2014.

     
  19.  
    08:23: ECB bond buying BBC Radio 4

    Andrew Wilson, chief executive of Goldman Sachs Asset Management, also tells Today it will take time before we will see the impact of the ECB's bond-buying programme. He expects inflation to remain low for most of this year: "Almost certainly we will see negative rates of inflation this year; we're really talking about 2016 to see the impact of this policy."

     
  20.  
    08:12: Bupa results

    Bupa wants to capture a slice of India's fast-growing health insurance market when rules on foreign investment are relaxed. Stuart Fletcher, chief executive, says it's "still quite a nascent market - there is tonnes of headroom for growth". The private healthcare group posted annual profits up 8% to £638m today.

     
  21.  
    SFO bank probe Robert Peston Economics editor

    Does alleged scamming of £200bn Bank of Eng scheme to rescue banks show that some bankers need psychiatric help?

     
  22.  
    07:53: Best investments Radio 5 live
    Lego

    Wake Up To Money was asking listeners earlier about the best investment they have made. For one listener it was a Lego Millennium Falcon set. Have you made a particularly canny investment? Give us your thoughts at bizlivepage@bbc.co.uk or @bbcbusiness.

     
  23.  
    07:42: Aviva profits

    Mr Wilson's comments came as the insurance giant Aviva reported a 6% rise in pre-tax operating profit of £2.17bn, compared with just over £2bn a year earlier. The insurer has has been going to through a strategic overhaul including the sale of its North American business last year. It also raised in annual dividend by 30%.

     
  24.  
    07:31: Aviva profits
    Aviva stadium

    Aviva chief executive Mark Wilson says its annual results show the insurer is making "tangible progress". Aviva - sponsor of Dublin's rugby stadium - started "2015 in a position of strength", but he adds it would be "wrong to assume that our turnaround is nearing completion, as we have further to travel than the distance we have come".

     
  25.  
    07:20: London Stock Exchange Group
    LSE Group

    Another good year for London Stock Exchange Group, with revenue up 32% to £1.28bn and adjusted pre-tax profits up 17% to £445.9m. However, on the pure pre-tax level profits slipped 5% to £284.3m. The company is worth £8.3bn and its shares have risen 18% in the past year.

     
  26.  
    SFO Bank investigationVia Twitter Kamal Ahmed BBC Business editor

    "Unprecedented" much over-used by us hacks, but this actually is @BBCNews SFO launches Bank of England criminal probe

     
  27.  
    07:10: ECB bond buying BBC Radio 4
    The EURO logo

    The European Central Bank reveals more details of its bond-buying programme later today - but don't expect any surprises, Andrew Wilson, chief executive of Goldman Sachs Asset Management, tells Today. He says we've already seen "marked weakening" of the euro, so it will be interesting to see what impact ECB action will have.

     
  28.  
    06:55: Drones
    drone

    The House of Lords has called for a tracking system for all drones and their users. A report by the EU Committee of the House of Lords described drones - or Remotely Piloted Aircraft Systems, to give them their official title - as an "exciting new technology", but warned that their use poses risks to the general public and other airspace users.

     
  29.  
    06:44: China growth BBC Radio 4

    China's 7% economic growth target for 2015 is about "sending a message" particularly to local governments, which look to Beijing for guidance in setting their own targets. But at the the same time the government is very concerned about the level of debt in the banking sector - something it is trying to address, Duncan Innes-Ker, China analyst with the Economist intelligence Unit, tells Today.

     
  30.  
    06:30: AbbVie

    Big news from the pharma world overnight as US company AbbVie announced a deal to buy leukemia drugmaker Pharmacyclics for $21bn (£13.8bn). It appears to have won the prize from under the nose of Johnson & Johnson, which some reports say was close to a deal.

     
  31.  
    06:20: Brazil economy Radio 5 live
    Copacabana beach

    The Brazilian currency - the real - has hit a 10-year low after the central bank raised interest rates by half a point to a stonking 12.75% overnight. The BBC's Daniel Gallas in Sao Paulo tells Wake Up to Money that the country could tip into recession this year as the government embarks on an austerity drive, raising taxes and cutting spending.

     
  32.  
    06:11: Interest rates Radio 5 live

    It's been six whole years since the Bank of England cut the base rate to 0.5%. That's been good for borrowers, but not so great for savers - of which there are many more after all. Vivan Slattery, an independent financial adviser, tells Wake Up To Money many of her clients have stayed in cash but are now looking at alternatives given that rates do not seem set to increase sharply anytime soon - particularly as many mortgage holders are now on the standard variable rate.

     
  33.  
    06:05: China growth Radio 5 live

    China has announced that its target growth rate for 2015 is 7% - down from 7.5% for last year. The BBC's Ali Moore in Singapore says the new target is not a reflection of panic in Beijing but part of its drive to lower expectations and rebase the economy to focus more on domestic demand. "It's more about quality than quantity," she adds.

     
  34.  
    Welcome to Thursday Chris Johnston Business reporter

    Good morning from me and Matthew West. Another busy day of business news coming up - we'll be here to guide you through it all. Get in touch with your comments at bizlivepage@bbc.co.uk or on Twitter at @bbcbusiness.

     

Features

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.