The concern that China will successfully build its own commercial jets and threaten the revenue of Boeing Co. (NYSE: BA) and Airbus took a step forward today. And the Chinese threat moved to General Electric Co. (NYSE: GE) and Rolls Royce, which make large jet engines. Chinese businesses will build engines for the new C-919 jumbo jet.
According to the People’s Daily:
China’s domestically developed jumbo jet C919 is expected to be equipped with homemade engines that feature light metal material, a Chinese expert said on Saturday.
Domestically made Changjiang-1000 engine (CJ-1000) that may be used to power the C919 is under development and will replace imported foreign engines in future on the jet, according to Cao Chunxiao, an academician with the Chinese Academy of Sciences and a researcher with Aero Engine Corporation of China Beijing Institute of Aeronautical Materials, said on Saturday.
The fact that the plane will fly at all could undermine Boeing and Airbus sales in what almost certainly will become the world’s largest market for commercial jets. Sales of the Airbus A380, the largest plane it makes, have already been very slow. The plane holds as many as 575 people. Boeing’s primary competitor in the large commercial plane business is the 777. The most expensive A380 costs $427 million, at list price. The most expensive 777 costs $400 million. Most airlines pay less than list price when they order large numbers of jets.
China is expected to account for 18% of the commercial aircraft market in 2036, up from 14% in 2016, according to Boeing’s “Current Market Outlook: 2017 to 2036.” China may be able to sell a new commercial airplane in other areas in Asia. Southeast Asia is expected to account for 9% of the global aircraft market in 2036.
Aerospace products are among America’s largest exports. That includes both commercial aircraft and aircraft parts and engines. That makes the success of a Chinese commercial jet and engine a real threat to one of the largest industries in the United States.