Boeing Faces Competition From China

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Chinese airlines are expected to purchase about 5,000 new planes in the next 20 years, and the country wants to keep some of the estimated $560 billion at home. To that end, a new company was founded in 2008, Commercial Aircraft Corporation of China, better known as Comac. So far, the Chinese firm has had its own troubles.

Getting a new airplane off the ground is a complicated task. Just ask the folks at Boeing Co. (NYSE: BA), where the first 787 Dreamliners were finally delivered to customers three years late and at massive cost overruns. Comac’s first commercial aircraft is a regional jet, the 90-seat ARJ21, that was being built by a consortium of Chinese aircraft companies, was announced in 2002 and is expected to begin commercial operations next year. The consortium was subsumed by Comac in 2009. The ARJ21 will compete against the regional jets built by Canada’s Bombardier and Brazil’s Embraer S.A. (NYSE: ERJ).

The first plane that Comac has designed from the ground up is the C919, a 158-seat single aisle (narrow-body) plane that will compete with Boeing’s 737 and 737 MAX and the A320 and A320neo from Airbus. The C919 service date was scheduled for 2016, but delays have pushed that date out at least to 2017, and more likely into 2018. The plane’s first test flight was originally scheduled for this year but has been delayed until late next year.

It took Boeing almost nine years to get the 787 into commercial service, so a 10-year timetable for the first commercial plane a country has ever built is not a bad showing. Comac reportedly has orders for 252 ARJ21s and 400 orders for the C919. The airplane leasing arm of General Electric Co. (NYSE: GE), GE Capital Aviation Services, as well as Ryanair Holdings PLC (NASDAQ: RYAAY) and British Airways, are among the 16 customers for the C919.

Comac is also reported to be pairing up with a Russian aircraft maker UAC on development of a dual-aisle, wide-body jet, although no time frame has been announced for that project.

Slicing off 400 of 5,000 planes from the total Chinese demand over the next two decades is just the beginning. And Comac clearly has designs on the international market as well, as the C919’s order demonstrates.

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