Big Pending China Deals for Boeing, Airbus Set Comac Back Again

China has succeeded in matching or surpassing Western industrial technology in cars and trains.

But in planes, it’s still woefully behind, a dilemma underscored this week by reports that Chinese airlines intend to order nearly a thousand new jets from Boeing Co and Airbus SE.

Commercial Aircraft Corp of China Ltd, as it is formally known, has delivered less than 200 planes since it was established in 2008 and they’re primarily flown by domestic carriers that are state owned also. That’s despite billions of dollars and years of effort into reducing China’s reliance on the duopoly of Airbus and Boeing.

As it is, Comac risks falling short of delivering some 75 jets this year.

“Any additional Boeing or Airbus narrowbody orders will deal a blow to Comac’s ambitions,” Eric Zhu, Bloomberg Intelligence Asia aviation and defence analyst, said.

Comac’s C919 jet, a 158- to 192-seat aircraft, is meant to take on the Airbus A320neo and Boeing’s 737 Max. But it’s struggling to sell internationally, mainly because Comac has been unable to secure certification of its airworthiness from gold-standard regulatory bodies outside of China.

Because the C919 is also heavily reliant on Western-made parts, including from the US, Shanghai-based Comac has been in the crosshairs of Washington’s tit-for-tat tariff dispute with Beijing that saw levies rise to as much as 145% before the two committed to a trade deal.

Previously, the US restricted some key parts including jet engines from being exported from the US to China, harming Comac’s efforts as its raised output. The single-aisle plane is built mostly with customised versions of parts from other manufacturers, such as engines from CFM International Inc, a Franco-US venture.

Comac planned to build and deliver as many as 75 planes this year, according to Cirium. To date, it’s handed over just five C919s to Chinese customers as of mid-August. China’s three biggest airlines — Air China Ltd, China Southern Airlines Co and China Eastern Airlines Co — expected Comac to deliver 32 C919s between them from a coordinated order of 300 planes made over the past 18 months.

Comac’s other jet that’s already in the skies is the smaller, regional C909, again operated by mainly domestic carriers as well as Indonesia’s TransNusa. Despite Beijing’s efforts to elevate Comac, the planemaker has placed less than 400 of its C919s to Chinese airlines despite an order book exceeding 1,000, largely populated by domestic aircraft leasing companies.

Airbus, meanwhile, which started producing its A320 family of jets in 1988, is about to outsell Boeing for the first time, perhaps as soon as next month, as the pair’s cumulative sales of their cash cow single-aisle jets top close to 12,175 units.

“For the time being, Comac is supplementary to Airbus and Boeing,” Lionel Olonga, senior valuations manager at aviation consultancy Cirium, said. “In the mid-2030s, it may have enough production and for replacement of narrow bodies, airlines could pivot to the C919.”

Comac has been trying to build an international presence, opening sales offices in Singapore and Hong Kong. It’s also targeted Vietnam, Indonesia and Cambodia to sell its planes. In some cases, it has offered generous financing terms, including even proposing to invest in airlines directly, to secure deals.

One area China and Comac is at least seeking less reliance on is its Western supplier base. Comac has been developing a China-made engine that it can deploy on the C919 and other future aircraft models it makes.

“Aircraft development and production is one of the hardest things and Comac is still one of the newest kids on the block,” said Alan Lim, director at Singapore-based Alton Aviation Consultancy. In the long run, as the C919 builds up a safe track record, “it may have the potential to challenge the duopoly.”