Long haul ahead for China's home-grown aircraft

PUBLISHED : Thursday, 05 November, 2015, 11:22pm
UPDATED : Friday, 06 November, 2015, 10:11am

China's first home-grown jet unveiled this week risks ending up as a money-sucking black hole as it is attempting to break into a market in what could be the worst possible time for newcomers, with the world's commercial jet order book bursting at a record US$1 trillion.

No airlines buy aircraft just because they are cheap as the cost of the flying metal is only the first of the many involved in the lifespan of a plane, and the jet programme may commercially fail if it cannot attract enough orders to cover the costs involved in the development and manufacture of the aircraft, top aircraft appraisers and analysts told the South China Morning Post.

"It is the most interesting time in the aviation business from the point of view of aircraft. Never before has there been this range of old aircraft, new aircraft and regional aircraft, with their different capabilities … It is like Christmas for aircraft engineers," said Peter Morris, the chief economist at Flightglobal Ascend.

But that just made it more difficult than it already was for China's Comac to break the duopoly of Boeing and Airbus, he said.

History is on the side of incumbents, as the economy of airline operation means the cost of adding a new manufacturer to an existing fleet is huge given the associated operating costs, from pilot availability to maintenance and support.

While Shanghai-based Comac has already garnered 517 orders for the single-aisle C919 jet before its rollout on Sunday, after seven years of development, it has not disclosed the price tag for the aircraft. The International Bureau of Aviation said the C919 with average specs had an estimated appraised value of US$36 million, compared with US$45 million for an A320-200 and US$47 million for the B737-800 with average specs.

But airlines did not make fleet decisions - which are very long-term commitments - based on aircraft price alone, Morris said.

Rather, cost for airlines was unit cost of operation, he said, which was why engine efficiency improvement made a great difference. By the time the C919 hit the market, it would have to compete against Boeing and Airbus' next generation of planes, making it extra hard for it to harness more orders, he said.

Analysts also said that apart from product performance, Comac's after-sale support capability as well as the product's transactional value were just as crucial in determining its commercial success - and the model's initial operators, expected to be all Chinese - would provide the testing ground for Comac to prove that to the world.

"For any new aircraft coming from a new manufacturer, you need to have proven reliability by getting it in the air, in service with a variety of operators to prove the airplane can do what it is supposed to do," said Gueric Dechavanne, a vice-president at Collateral Verifications.

"You also need to show the level of support you can provide, and the financial institutions and leasing community have to accept that as an investment product in order for it to be a successful global product, otherwise it may only just be popular in a certain region."

Les Weal, a director at aircraft appraiser Oriel Aviation, said: "Product support is not only technology and experience and a global network, but it also involves details like, if something happens to your plane somewhere, can a [Chinese] passport holder travel there immediately without having to wait for a visa? … It took Airbus 20 years to do it, I don't think Comac will do it overnight. Maybe the next product after the C919 will do it."

According to Ascend, there are more than 14,000 commercial jets worth over US$950 billion on order at the moment, a record high. The number of new jets delivered in a year, also at a record high, is forecast to rise to nearly 2,200 by the end of the decade.

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