Thursday, September 17, 2015

Bad omen: Boeing loses out to Chinese jetmaker in order from Thai airline

A non-Chinese airline will replace its Boeing jets with Chinese-built jetliners, an ominous sign for a U.S. company that sees China as its largest single future market.
Thailand-based City Airways, a small-but-growing regional airline based in Bangkok, this week signed a deal for 10 Chinese-built C919s to replaced the two leased 737-400s it now operates.
The company also ordered 10 ARJ21 regional jets. Both are built by the Commercial Aircraft Corporation of China, or COMAC, a government-funded company that is working to become an active competitor in the commercial market.
The sale is of particular significance in the Puget Sound region because the Chinese designed the single-aisle C919 aircraft to directly compete with Boeing’s 737 series and Airbus’ A320 series. Boeing makes the 737s exclusively in Renton.
While the repeatedly delayed C919 won’t be as advanced aerodynamically or electronically as Boeing's or Airbus' planes, it will be powered by similar engines. And City Airways probably got a killer discount because the government-supported Chinese manufacturer intensely wants to enter the global market, so short-term profit is not a concern.
In addition, with Boeing and Airbus both working on eight-year backlogs, City may get its C919s sooner from COMAC than it could have from the two larger companies.
COMAC is in the final stages of building its first C919, which is set to fly early next year.
“This order, outside of China, indicates that COMAC will be aggressive internationally, and will focus on Southeast Asian markets as the company moves internationally,” wrote Addison Schonland, partner at AirInsight consultancy, this week.
“While Boeing and Airbus have not considered COMAC a major threat in the short-term, they recognize the long-term potential for aircraft production in China.”
COMAC claims 507 orders for the 156-passenger C919, 96 percent them from Chinese airlines.
Boeing has 4,269 unfilled orders for 737s, and Boeing Vice President of Marketing Randy Tinseth said Tuesday, during a speech before Seattle business leaders, that a third of those are going to China.
“We have delivered more than half the airplanes in the (Chinese) market,” he said. “We’re working hard to extend market share over time.”
The 737 model accounts for three-quarters of all of Boeing's unfilled orders, though it is Boeing’s least expensive jet. The popular 737 Max 8 is now listing for $110 million.
Boeing has many arrows in its quiver to combat the Chinese. Boeing has a strong technological lead, and its next jet is likely to be made mostly of carbon fiber, and assembled by even more robots. That could help even out the difference in the cost of wages between Boeing's U.S. workforce and the less-expensive Chinese workforce.
In addition, Boeing already builds major subassemblies of the 737 in China. Boeing next week may announce it’s going to start completing some 737s there, during the high-profile visit by Chinese President Xi Jinping.
(Steve Wilhelm - Puget Sound Business Journal)

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