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The Sino Sitch
Chinas aviation market is booming, with passenger traffic growing 20% a year, aggressive capacity and fleet expansion and a whirlwind of consolidation activity.
Airline stocks, such as Hong Kong-listed Air China, China Southern and China Eastern, have rebounded strongly in 2010.
The country will open 10 new airports this year, according to the Civil Aviation Administration of China. The CAAC expects 250 airports by 2020, up from 176 at year-end.
Boeing and Airbus in China
Boeing delivered its 800th airplane to China in July, and has an order backlog of nearly $30 billion from China. (Almost 60% of aircraft in Chinas fleet is made by Boeing.)
China is Boeings biggest export market. Not by a little, but by a lot, says Boeing Chief Executive James McNerney.
If I had to guess, Airbus has delivered exactly 601 airplanes to China. Plus or minus 100. (Airbus doesnt share info like Boeing does.
That said, Chinese airlines will account for 20% of all Airbus planes delivered in 2010, compared with 3.5 percent a decade ago. (Opening a final assembly facility in Tianjin last year helps.)
Enter the C919
Ive written a little about Chinas homegrown jets before, but the next gen of indigenous aircraft promises to be a potential ball-buster for current airframe kingpins Boeing and Airbus. Chinas next big thing, the home-grown C919, will be the first all new narrowbody in almost 30 years. Seating up to 190 passengers, the single aisle airliner packs a wallop on the status quo.
The C919 is a direct challenger to the Airbus A320 and the Boeing 737 families, dominant airline favorites even with their aging designs.
The C919 will likely have the latest and greatest technology from offshore suppliers that are willing to put their IP at risk.
Among other things, the C919 should be at least 15%-18% more fuel efficient, with a faster cruising speed (Mach 0.785) and longer range. It will also be wider than the 737 and A320.
For pilots, the C919 will have basically the same fly-by-wire flight control system as Boeings upcoming 787, courtesy of Honeywell. (For the layman, fly-by-wire systems replace manual flight control. At the risk of offending the only commercial pilot reading this, in Airbus jets, which feature fly-by-wire, the computer flies the plane. In Boeings, the pilot flies the plane; the only current exception is the 777. Yes, I know Im over-simplifying.)
The magnitude of the C919s market entry and potential impact cant be understated. The 737 series is the best selling jet airliner in history. According to FlightGlobal, there are on average 1,250 737s airborne at any given time, with one departing or landing somewhere every five seconds. The last time I looked it up (about five seconds ago), there were over 4,500 currently in service, with 2,016 orders yet to be filled.
The Airbus A320, with almost 3,400 in service (Boeings 737 family has a 20-year headstart), is the plane that hero Capt. Chesley Sully Sullenberger landed in the Hudson River last year after both engines choked on a flock of geese and went kaput. Sully, with no engines working and a computer-aided assist, skillfully dropped an 80-ton missile into a freezing body of moving water. All 150 passengers and 5 crewmen lived. Nuff said.
Will Anyone Buy the C919?
With the C919, China aims to satisfy some of its domestic demand and boost exports, initially in Asia. State-owned Commercial Aircraft Corp. of China (Comac) expects to sell 2,509 C919s over 20 years.
Over the same period, Boeing estimates China to be a 3,770 aircraft, $400 billion market. More than 2,600 of those are forecast to be narrowbody aircraft (uh, like the A320, 737 and C919). You do the math.
In my book, the C919 will be as close to a sales slam dunk as you can get, at least in China. State-owned Air China, China Eastern and China Southern are expected to order the C919 as they have ready-access to bank financing as well as injections of government cash when needed. Chinas other 15 or so domestic airlines will likely follow suit. (Like I said earlier, carrier consolidation is going nuts so its hard to keep track of who owns who. At the beginning of this year there were 20 Chinese domestic airlines. I think.)
As for offshore carriers, they have ready access to Chinese financing as well, with many already taking advantageSouthwest Airlines, British Airways, Qantas, Lufthansa, Air France and Virgin Blue to name a few. In addition, both Boeing and Airbus have deals with Chinese institutions for customer financing support to help fill the void left by the exit of many U.S. and European banks. China Construction Bank, China Development Bank, Bank of China, the Industrial and Commercial Bank of China (ICBC), and the Export-Import Bank of China are among Chinas financial institutions offering global capital financing for airplane purchases.
Globally, Airbus A320 and Boeing 737 sales are smoking hot, for example, dominating bookings at the recent Farnborough Air Show. Deliveries to date are cooking as well, with 159 737s and 140 A320s delivered at the half year mark. Both Boeing and Airbus are ramping up monthly production.
In China, new orders for the 737 and A320 are brisk. Air China, the worlds largest carrier by market cap, bought 20 more 737s in June, and followed that up with an order for 20 A320s in July. (The airlines current fleet includes 55 Airbus A320 and 118 Boeing 737 family aircraft. Is this too much detail for you?) Capital Airlines, Beijings first local carrier, plans to buy 20 to 30 A320s in 2011.
Only If It Flies
This conversation is moot, of course, if the C919 cant get off the ground. Honestly, no one expects COMAC to get the C919 right on the first try, $30 billion in development costs notwithstanding.
On the calendar, the C919 is slated to fly in 2014 and enter service in 2016. (Good luck with that.) There will be inevitable integration delays that even the OEMs cant handle (see Boeing 787 and Airbus A380).
But when it does fly, were talking shake up, not necessarily of apocalyptic magnitude but certainly big enough to hurt both Boeing and Airbus. Global demand for narrowbodies over the coming two decades will be 21,160, according to Boeing estimates. Thats $1.7 trillion worth of aircraft that, at present, Boeing and Airbus would expect to snag more than 90% of the orders.
Theres no doubt that Chinese airlines will snub the 737 and A320 for a homegrown jet, even if only to support Chinas aerospace manufacturing ambitions. My sources in Beijing, who spoke on condition of anonymity because they are not authorized to speak on the record, say that they will pump as many additional dollars into the C919 program as necessary. China wants to be a major airframe player, and with the successful launch of the C919, they stand a solid chance of skating by Embraer (Brazil) and Bombardier (Canada), pretty much in a blink of an eye to play with the big boys.
Again, read Reinhardt Krauses post to see whats at stake for suppliers. They face some tough decisions on what to sell to whom.
Chinas aviation market is booming, with passenger traffic growing 20% a year, aggressive capacity and fleet expansion and a whirlwind of consolidation activity.
Airline stocks, such as Hong Kong-listed Air China, China Southern and China Eastern, have rebounded strongly in 2010.
The country will open 10 new airports this year, according to the Civil Aviation Administration of China. The CAAC expects 250 airports by 2020, up from 176 at year-end.
Boeing and Airbus in China
Boeing delivered its 800th airplane to China in July, and has an order backlog of nearly $30 billion from China. (Almost 60% of aircraft in Chinas fleet is made by Boeing.)
China is Boeings biggest export market. Not by a little, but by a lot, says Boeing Chief Executive James McNerney.
If I had to guess, Airbus has delivered exactly 601 airplanes to China. Plus or minus 100. (Airbus doesnt share info like Boeing does.
That said, Chinese airlines will account for 20% of all Airbus planes delivered in 2010, compared with 3.5 percent a decade ago. (Opening a final assembly facility in Tianjin last year helps.)
Enter the C919
Ive written a little about Chinas homegrown jets before, but the next gen of indigenous aircraft promises to be a potential ball-buster for current airframe kingpins Boeing and Airbus. Chinas next big thing, the home-grown C919, will be the first all new narrowbody in almost 30 years. Seating up to 190 passengers, the single aisle airliner packs a wallop on the status quo.
The C919 is a direct challenger to the Airbus A320 and the Boeing 737 families, dominant airline favorites even with their aging designs.
The C919 will likely have the latest and greatest technology from offshore suppliers that are willing to put their IP at risk.
Among other things, the C919 should be at least 15%-18% more fuel efficient, with a faster cruising speed (Mach 0.785) and longer range. It will also be wider than the 737 and A320.
For pilots, the C919 will have basically the same fly-by-wire flight control system as Boeings upcoming 787, courtesy of Honeywell. (For the layman, fly-by-wire systems replace manual flight control. At the risk of offending the only commercial pilot reading this, in Airbus jets, which feature fly-by-wire, the computer flies the plane. In Boeings, the pilot flies the plane; the only current exception is the 777. Yes, I know Im over-simplifying.)
The magnitude of the C919s market entry and potential impact cant be understated. The 737 series is the best selling jet airliner in history. According to FlightGlobal, there are on average 1,250 737s airborne at any given time, with one departing or landing somewhere every five seconds. The last time I looked it up (about five seconds ago), there were over 4,500 currently in service, with 2,016 orders yet to be filled.
The Airbus A320, with almost 3,400 in service (Boeings 737 family has a 20-year headstart), is the plane that hero Capt. Chesley Sully Sullenberger landed in the Hudson River last year after both engines choked on a flock of geese and went kaput. Sully, with no engines working and a computer-aided assist, skillfully dropped an 80-ton missile into a freezing body of moving water. All 150 passengers and 5 crewmen lived. Nuff said.
Will Anyone Buy the C919?
With the C919, China aims to satisfy some of its domestic demand and boost exports, initially in Asia. State-owned Commercial Aircraft Corp. of China (Comac) expects to sell 2,509 C919s over 20 years.
Over the same period, Boeing estimates China to be a 3,770 aircraft, $400 billion market. More than 2,600 of those are forecast to be narrowbody aircraft (uh, like the A320, 737 and C919). You do the math.
In my book, the C919 will be as close to a sales slam dunk as you can get, at least in China. State-owned Air China, China Eastern and China Southern are expected to order the C919 as they have ready-access to bank financing as well as injections of government cash when needed. Chinas other 15 or so domestic airlines will likely follow suit. (Like I said earlier, carrier consolidation is going nuts so its hard to keep track of who owns who. At the beginning of this year there were 20 Chinese domestic airlines. I think.)
As for offshore carriers, they have ready access to Chinese financing as well, with many already taking advantageSouthwest Airlines, British Airways, Qantas, Lufthansa, Air France and Virgin Blue to name a few. In addition, both Boeing and Airbus have deals with Chinese institutions for customer financing support to help fill the void left by the exit of many U.S. and European banks. China Construction Bank, China Development Bank, Bank of China, the Industrial and Commercial Bank of China (ICBC), and the Export-Import Bank of China are among Chinas financial institutions offering global capital financing for airplane purchases.
Globally, Airbus A320 and Boeing 737 sales are smoking hot, for example, dominating bookings at the recent Farnborough Air Show. Deliveries to date are cooking as well, with 159 737s and 140 A320s delivered at the half year mark. Both Boeing and Airbus are ramping up monthly production.
In China, new orders for the 737 and A320 are brisk. Air China, the worlds largest carrier by market cap, bought 20 more 737s in June, and followed that up with an order for 20 A320s in July. (The airlines current fleet includes 55 Airbus A320 and 118 Boeing 737 family aircraft. Is this too much detail for you?) Capital Airlines, Beijings first local carrier, plans to buy 20 to 30 A320s in 2011.
Only If It Flies
This conversation is moot, of course, if the C919 cant get off the ground. Honestly, no one expects COMAC to get the C919 right on the first try, $30 billion in development costs notwithstanding.
On the calendar, the C919 is slated to fly in 2014 and enter service in 2016. (Good luck with that.) There will be inevitable integration delays that even the OEMs cant handle (see Boeing 787 and Airbus A380).
But when it does fly, were talking shake up, not necessarily of apocalyptic magnitude but certainly big enough to hurt both Boeing and Airbus. Global demand for narrowbodies over the coming two decades will be 21,160, according to Boeing estimates. Thats $1.7 trillion worth of aircraft that, at present, Boeing and Airbus would expect to snag more than 90% of the orders.
Theres no doubt that Chinese airlines will snub the 737 and A320 for a homegrown jet, even if only to support Chinas aerospace manufacturing ambitions. My sources in Beijing, who spoke on condition of anonymity because they are not authorized to speak on the record, say that they will pump as many additional dollars into the C919 program as necessary. China wants to be a major airframe player, and with the successful launch of the C919, they stand a solid chance of skating by Embraer (Brazil) and Bombardier (Canada), pretty much in a blink of an eye to play with the big boys.
Again, read Reinhardt Krauses post to see whats at stake for suppliers. They face some tough decisions on what to sell to whom.
