Summary
Is China really a threat to Airbus and Boeing? Perhaps it is, but you have to remember that a sensational headline seldom makes a good story – particularly when there is no industry experience behind it.
Analysis
John Leahy’s comments that a new Airbus A320 replacement may not be ready to enter service until 2024 shows two key things.
Firstly – that neither Airbus (nor Boeing) are willing to sacrifice their current backlogs of A320s and 737s in favour of a replacement when demand shows no sign of waning.
Secondly – neither Airbus nor Boeing are convinced that the technology suite to deliver cost savings in operation, procurement, development and maintenance warrants the parting of up to $10bn or more to develop a new narrowbody family.
Bloomberg’s recent ill-informed article cites that the A320/737 replacements are “late” because of lack of resources – nothing could be further from the truth. Resources may be a factor, but they are not the sole driver.
It’s simply because the drive for efficiency on many levels on a new narrowbody airplane is not yet present to justify launching replacements for the existing line up available today – of course, had you worked in the industry rather than observe it through tainted lenses, you’d know that.
While Boeing has taken a more step-by-step approach to enhancing the Next Generation 737 family, Airbus too now seems to be ready to take this path as well – not least because tests on the Pratt & Whitney GTF concept are not yielding enough efficiency savings to even validate an engine refit program on the A320 family.
China’s Comac may have stolen the limelight at a recent aerospace show with its A320/737 sized C919 model, but the reality is that for them to deliver on alleged 15% better fuel savings than the Airbus/Boeing models is at best, a claim too far. What technology do they have that the other two jet makers do not have to achieve such a wide margin of perceived efficiency?
Which airlines (in and outside of China) are suddenly crowing for this C919?
Yes, the silence is deafening.
A reverse-engineered model of an A320 in the Comac C919 does not qualify as an existential threat.
Many airlines are indeed asking the question about new narrowbody airplanes, but since every airplane is a customer-driven entity, none are foolish about the technological challenges that lie ahead in achieving the gains they seek.
In recent years, both Airbus and Boeing have sold roughly the same number of A320/737s in China, despite the former having a production line in Tianjin.
Aside from the political pressure on Chinese airlines to take the C919 (if that model ever emerges in its current form), the biggest challenge for Comac will be convincing other airlines on a global platform that they truly have a product that is superior to the enhancements to the A320 and 737.
When you consider that Airbus and Boeing regularly talk about single-digit efficiency gains through a variety of low-cost options, it becomes quite clear that Comac’s claims about a 15% betterment over the A320/737 is about as accurate as the Bloomberg “report”.
But of course, how could someone let something as important as facts get in the way of good old mediocrity reporting.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
