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March 15, 2019

Boeing 737 Max Mishap Could Be Boon For Made-In-China Planes

The Ethiopian Airlines crash of a Boeing 737 MAX may have given Chinese President Xi Jinping enough leverage to start transforming his country into an aerospace superpower.     
The wave of global airline carriers canceling 737 MAX orders has begun. Indonesia’s Garuda Indonesia said Thursday it would cancel its order for 49 Boeing 737 MAX jets. This has provided state-owned Commercial Aircraft Corp. of China, or Comac, the ability to seize market share with its C919, a narrowbody passenger plane with a seating capacity of 170.  
The Chinese plane directly competes with the MAX, as well as the Airbus A320neo, and as part of President Xi's ambitious 'Made in China 2025' plan, the country is betting that it can penetrate the commercial airline business mostly controlled by Western aerospace companies.
On Sunday, China quickly grounded all MAX planes within hours of the Ethiopian Airlines crash. “These kinds of events provide an opportunity for Comac to get their foot in the door,” says Chad Ohlandt, a senior engineer at Rand Corp. in Washington. “If they’re smart, they’re going knocking on doors of whatever ten airlines are considering buying narrowbody aircraft.”
Comac started test flights of the C919 in 2017, has received 815 orders from 28 customers. This number could grow as airline carriers across the world are losing trust in Boeing products. The company said in November that China’s aviation market would take delivery of 9,000 planes, worth $1.3 trillion, over the next several decades. Two-thirds of those will be single-aisle planes similar to the Boeing 737.
“Strategically speaking, aviation manufacturing is a national imperative,” says Yu Zhanfu, a partner at Roland Berger Strategy Consultants in Beijing who focuses on aerospace and defense. “Once you have aviation manufacturing reaching economies of scale, it will lift the entire industrial chain.”
Bloomberg notes that not all skies are clear for Comac. Chinese planes don’t have an extensive safety track record of American planes. More important, there are no Chinese companies that can design and manufacture jet engines for commercial use, says Yong Teng, a partner with L.E.K. Consulting in Shanghai. The C919’s engines are made by CFM International, a joint venture between GE Aviation and Safran Aircraft Engines.
It's evident that the Chinese lack the technology that goes into jet making. The U.S. Department of Justice charged two Chinese nationals in October for attempting to steal information on commercial aircraft engines. The Chinese government dismissed the charges.
Nicholas Eftimiades, a lecturer in the School of Public Affairs at Pennsylvania State University in Harrisburg, said, “Aerospace technology is the No. 1 target for China espionage."
And according to a new Bank of America report Thursday, a software fix for the MAX could take three to six months. Just enough time for China to market its commercial jets to global airliner carriers who are canceling MAX orders left and right. China is not stupid - they will seize the moment.
Courtesy of Tyler Durden, Founder of Zero Hedge  (More by ZH here)     
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.  © EconMatters.com All Rights Reserved | Facebook | Twitter | YouTube | Email Digest

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