The market for commercial airplanes in China is set to explode. At least that’s the prediction from a senior official at Boeing Co. (NYSE: BA), who has predicted that over the next 20 years the country’s airlines will need to purchase some $600 billion worth of commercial aircraft.
The $64 question, of course, is which company will get the orders for those 5,000 new planes. The main players now are Boeing and its arch-rival, European Aeronautic Defense and Space Co. NV (OTC: EADSY), maker of the Airbus planes. China’s three largest carriers, Air China Ltd. (OTC: AIRYY), China Southern Airlines Co. (NYSE: ZNH), and China Eastern Airlines Corp. (NYSE: CEA), all currently include both Boeing and Airbus planes in their fleets.
But a new Chinese aircraft maker, Commercial Aircraft Corp. of China, or Comac, is readying a new aircraft to go into production in 2016 that competes with Boeing’s 737 and Airbus’s A320. It’s a fair bet that China’s airlines will take as many of the Comac planes as they can afford.
Of the 5,000 planes that Boeing predicts will be needed in China over 20 years, Comac expects to provide more than 2,000. That may be a pretty aggressive target for a company that has yet to deliver even one plane, but the single-aisle, narrow-body configuration is the sweet spot for aircraft size in the domestic Chinese market, and Comac’s C919 is aimed right at the Boeing 737 and the Airbus 320.
Ryanair Holdings plc (NASDAQ: RYAAY) has also signed an agreement with Comac to develop a plane to compete with Boeing’s 737, which Ryan now flies exclusively.
The Chinese government has directed the country’s carriers to begin placing orders for the Comac C919, and that’s already happening. China Southern has ordered 20 of the C919s, as have Air China and China Eastern Airlines. Two smaller privately-held Chinese carriers have ordered a total of 16 of the Chinese-made craft.
The Chinese carriers are also ordering Boeing and Airbus planes in pretty large numbers. China Southern has placed orders for 67 Airbus planes and 64 Boeing planes, which includes 10 of the new 787 Dreamliner. Air China is adding 81 Airbus planes and 81 new Boeing planes, including 15 Dreamliners. China Eastern has placed orders for 86 Airbus planes and 15 Boeing Dreamliners.
Air travel will become more affordable in China, and the country’s vast size is well-served by regional jets such as the 737, the A320, and the prospective C919. By far the largest part of the 5,000 projected orders will be for these regional jets. If China’s own Comac gets 40% or more of the orders, that still leaves plenty for Boeing and Airbus. It’s just less than the 100% the companies are used to fighting over.
Sponsored: Find a Qualified Financial Advisor:
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.