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

BBC Business Live

  1.  
    RBS RESULTS Via Twitter Kamal Ahmed BBC Business editor

    tweets: RBS Ross McEwan says UK recovery "broader than a consumer recovery". Gross lending to businesses up.

     
  2.  
    RBS RESULTS 08:41:

    More market musings on RBS. Chirantan Barua, an analyst at Sanford C. Bernstein, says the reduction in money set aside for bad loans was "extremely strong" compared with City expectations. Sales and capital were better than he expected too, he said. He reckons the shares may be worth 440p apiece.

     
  3.  
    RBS RESULTS Via Twitter Kamal Ahmed BBC Business editor

    tweets: RBS CEO Ross McEwan says there has been a cooling in the mortgage and housing market over the last two months. "That is not a bad thing."

     
  4.  
    MARKET UPDATE 08:24:

    European markets are lower today with investors focused on earnings news and economic data release. The biggest rise on the FTSE 100 is perhaps unsurprisingly RBS - up 10.07% or 33.10p so far to 361.9p after it took everyone by surprise by announcing first-half pre-tax profits of £2.65bn a week early.

    • The FTSE 100 is 0.28% lower at 6806.49
    • The Dax is down 0.22% to 9772.94
    • The Cac-40 has fallen 0.50% at 4138.73
     
  5.  
    RBS RESULTS 08:11:

    Vivek Raja, an analyst at Oriel Securities, is one of the first out of the traps with some insight into what the RBS results mean. "The preannouncement reflects better than expected operating performance on credit performance, in the Bad Bank (RBS Capital Resolution) and on capital ratios," he says. So that means 1) loans are performing better, 2) the worst loans are performing better, and 3) the bank has more capital as a percentage of loans.

     
  6.  
    VODAFONE 07:56:
    People walk past a Vodafone shop

    Vodafone's first quarter trading shows the mobile operator getting no relief from its European market. Group service revenue - that's customers buying handsets and using the Vodafone network to you and me - was £6.4bn in the three months to 30 June, down 7.9% on the same period last year. Competition and regulation "continue to create a challenging operating environment," it says.

     
  7.  
    LLOYDS SETTLEMENT 07:41:
    A general view of a sign for Lloyds Bank

    Lloyds Banking Group has responded to recent stories regarding settlements "with a number of government agencies" regarding rates setting - Libor. It's in "late-stage" discussions, it says.

     
  8.  
     
  9.  
    RBS RESULTS 07:27:
    RBS

    "Asset quality continued to improve in the UK and Ireland," says what was once the world's largest bank. In English, more of their loans are more likely to be repaid in full and on time. The bank has set aside £22.4bn against bad loans, down from £25.2bn in December. Ulster bank posted a modest profit of £55m - that's from a £381m loss a year ago.

     
  10.  
    BSKYB PROFITS 07:20:
    British Sky Broadcasting headquarters

    BSkyB has reported a slight slip in annual pre-tax profit to £1,1bn compared with £1,2bn a year earlier. Tax for the year was £249m compared with £295m in 2013, an effective tax rate of 21% as a result of the reduction in the rate of UK corporation tax.

     
  11.  
    RBS RESULTS 07:16:

    Pre-tax profit was £2.65bn, up from £1.37bn as impairments dropped like a stone -- down to £269m from £2.15bn. Those reductions in bad loan costs far outweighed a rise in restructuring costs and a drop in sales. £150m was added to provisions for Payment Protection Insurance (PPI) and £100m to interest rate swap provisions.

     
  12.  
    RBS RESULTS 07:08: Breaking News

    A turn up for the books. Royal Bank of Scotland Group has put out its first-half results early. They were due 1 August, according to the bank. Operating profit rose to £2.6bn from £708m in 2013.

     
  13.  
    BALFOUR MERGER 07:02:
    A Balfour Beatty workman on a construction site

    UK construction firm Balfour Beatty is in talks with rival Carillion about a potential £3.05bn merger, it has emerged. The two companies confirmed what they described as "preliminary discussions." In a joint statement they said they believed a "merger of the two groups has the potential to create a market leading services, investments, and construction business of considerable depth and scale."

     
  14.  
    DISCOUNT STORES 06:51: Radio 5 live

    Look out for Hussein Lalani, co-founder and commercial director of the 99p stores, on 5 live. He says before the recession suppliers would just give them their leftovers. Now many brands are making products just for the discount market.

     
  15.  
    GDP FIGURES 06:40: BBC Radio 4

    Marian Bell, economist and former member of the Bank of England's Monetary Policy Committee has been talking to the Today programme about the UK's economic recovery. She says it is "people are expecting a 0.9% rise in output and that would be sufficient to surpass the 2008 level." But it has taken more time to achieve that economic recovery than in the past. In fact, she says, it has been "the longest that output has been below its previously level for more than 100 years."

     
  16.  
    GDP FIGURES 06:27: Radio 5 live

    Elaine Coverley, head of equity research at Brewin Dolphin is on Wake up to Money. "We need other markets to keep that going," she says of growing UK gross domestic product. Markets like the US aren't doing so well. The IMF slashed its US economic growth estimate on Wednesday to 1.7% for 2014.

     
  17.  
    GDP FIGURES 06:11: Radio 5 live

    "The consumer is doing a lot of the heavy lifting," in the economy, says economist Alan Clarke of Scotiabank on 5 live. How, when wages are stagnant? The housing market, of course. As the value of homes rises, people are prepared to save less and spend more without earning more. House prices won't go up at the current rate forever, though, he says.

     
  18.  
    GDP FIGURES 06:03: Radio 5 live

    CBI director-general, John Cridland is still on 5 live. The recovery is currently investment-led rather than export-led. Sterling's strength isn't helping but isn't wholly choking things off either, he says.

     
  19.  
    GDP FIGURES 06:01: Radio 5 live

    Director-General of the Confederation of British Industry John Cridland expects growth of 0.8% in the second quarter, he tells 5 live. "We are getting some balance in the recovery, like a boxer in the boxing ring finding his feet," he says. Companies are investing, finally, he says, and that's crucial. This is what will add to wages.

     
  20.  
    06:00: Howard Mustoe Business reporter

    Good morning! Please get in touch via email on bizlivepage@bbc.co.uk or via twitter @BBCBusiness

     
  21.  
    06:00: Matthew West Business Reporter

    Good morning. So, let's catch up from last night: Amazon had a tough second quarter, as did General Motors. And the International Monetary Fund downgraded its global economic growth forecast. Here at home it's as good as confirmed that the UK is richer than it has ever been (you literally have never had it so good, you lucky, lucky people). Do you feel richer than you did last year? How about last week? Or yesterday even? We'll find out at 09:30 with second quarter GDP, so stay with us.

     

Features

BBC © 2014 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.