China's domestic plane industry forging ahead

[November 16, 2010]  ZHUHAI, China (AP) -- The Zhuhai air show is showcasing China's ambitions to create Asia's first successful commercial airplane business in a challenge to Airbus and Boeing's long-standing domination of the industry.

Plane builder Commercial Aircraft Corporation of China Ltd. is offering VIP flights on its 70- to 110-seat ARJ21 jet, for which it has 240 orders including options and plans to begin delivering to customers late next year after repeated delays.

On Tuesday, the state-owned company, known as Comac, made a further splash with the announcement that its single-aisle C919 passenger jet had received 100 orders from Chinese airlines and an international customer, despite it still being in the design stage.

No details were given about how many planes were ordered by each customer or the prices they will pay, but company executives were quick to claim a breakthrough for the nation.

China launched its modern commercial aviation industry less than a decade back and two years ago reorganized it to create Comac to build the ARJ21 and develop the C919. That was part of an overall campaign to create Chinese industries able to compete at the global level, and also stands to give China bragging rights as the only Asian country to successfully produce commercial aircraft after attempts by Japan, South Korea and Indonesia failed to get off the ground.

"This is not only an economic exercise. This is also an exercise in patriotism," said Richard A. Bitzinger, an expert on the Chinese civil aviation industry at the S. Rajaratnam School of International Studies in Singapore.

Key tests still lie ahead, with Comac yet to convince foreign airlines to place large orders.

Because of the priority Beijing is giving to developing homegrown technology, there has been speculation Comac could receive a helping hand from the Chinese government. Beijing must approve all major airplane purchases and has considerable power over financing and other inducements that could affect purchases.

Airbus China President Lawrence Barron said he wasn't worried about unfair competition and believed the C919 would succeed or fail commercially based on its attractiveness to airlines.

"We think it's understandable that the Chinese government would want to encourage the Chinese airlines to order this aircraft, but that's not sufficient," Barron said at a news conference in Zhuhai.

"The airlines will not take delivery and operate this aircraft unless it's competitive," he said.

Even more daunting is the prospect of convincing foreign carriers in major markets to become customers. So far, tiny Lao Airlines -- the flag carrier for one of Asia's poorest countries -- has been the only customer for the ARJ21.

"They've got a bit of an uphill battle getting people outside China to take them seriously," said Bitzinger.

On Tuesday, at least, China had the attention of the world's aviation media, although confusion reined over the C919 orders announcement.

The 150-seat C919 is a prospective competitor to the Boeing 737 and Airbus A320, particularly in the Chinese market, where Boeing estimates that domestic airlines are expected to add 4,330 aircraft worth $480 billion by 2029. That's up from a forecast last year of 3,770 planes worth $400 billion.

Comac forecast that China will purchase 4,439 planes worth more than $456 billion by 2029, underscoring arguments that China's vast aircraft market is big enough to welcome new competitors. The majority of those planes, 68 percent, will be in the 120-200 seat range.

Spokesmen for the six companies named in the announcement, which include China's top three airlines, flag carrier Air China, China Southern and China Eastern, refused to comment and did not immediately respond to faxed questions. Others listed as customers were HNA Group, owner of well-regarded domestic carrier Hainan Airlines, CDB Leasing Co. and U.S. airplane leasing company GE Capital Aviation Services.

The company was tightlipped about the orders at a news conference called to announce its forecasts for airplane industry sales through 2029.

"The program is proceeding smoothly," forecast department director Dang Tiehong said. "We'll try to make other arrangements to answer other questions."

The lack of details appeared to be an indication that the agreements were still in their preliminary stages. Big flashy announcements are a staple of air shows and don't often imply immediate moves.

Quoted in a news release, Comac Chairman Zhang Qingwei, was firm, however.

"The confirmation from the original launch customers creates a market foundation for the C919 large passenger plane which is smoothly moving from the research and development stage into the build stage," Zhang said.

Comac aims to complete the broad design this year, with the finer details worked out by 2012. The first test flight is planned for 2014 and the first planes are set to be delivered in 2016.

The ARJ-21, which relies heavily on foreign components, has seen its own delivery date repeatedly pushed back from 2007, with Comac now targeting late next year.

[Associated Press; By CHRISTOPHER BODEEN]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.