High-flying ambition needs to be balanced

PUBLISHED : Monday, 12 May, 2008, 12:00am
UPDATED : Monday, 12 May, 2008, 12:00am

A nation that can successfully make large planes commercially can truly claim to have made it on the world stage. The industry is hi-tech and high-risk which adds up, in international eyes, to high-prestige. Taking on the big players - the US company Boeing and the European consortium Airbus - is seen as much in terms of pride as profits.

China took on the challenge yesterday, setting up a company with the aim of turning out its first 150-seat plane by 2020. Numerous developing countries have had such an ambition, but few have succeeded; Brazil's Embraer is the only one considered a serious rival. Japan, a developing country in the 1960s when such a venture was launched, tried and failed. Plans by Indonesia to join the commercial passenger jet market were scuppered by the Asian economic crisis in 1997.

The dominance of Boeing and Airbus make breaking into the market not for the faint-hearted. Apart from massive research and development investment, those involved need technology, skill, determination and commitment. Investors also need patience: huge losses are likely for at least the first decade.

China has the financial resources for such a venture. Beyond prestige, it has good reason to be pumping billions of yuan of state funds into upping the scale of its aircraft industry. The stated national goal is to shift manufacturing into higher-tech industries, and building jet planes fits in perfectly with this objective. Domestic air travel is booming and industry experts estimate at least 2,650 new commercial passenger aircraft will be needed in the next 20 years to cope with the demand. For now, Boeing and Airbus are the biggest sources; a domestic manufacturing base would reduce dependence on imports, increase competition and better meet local needs.

These are laudable aims. As worthy as they may be, though, the project has to eventually be commercially viable. State funding may be the basis to get it off the ground, but this must at some point be capped to allow sound economics to prevail. Wherever state funding is involved, national objectives have to be well balanced against commercial principles.