Western companies are playing a prominent role helping China become a serious new competitor in the global aerospace industry.
About half of the equipment on the ARJ21, the first regional jet made by government-run AVIC I Commercial Aircraft Co., is made by U.S. companies. The 90-seat aircraft represents China's latest bid to eventually challenge Boeing Co. and European Aeronautic Defence & Space Co.'s Airbus in the market for bigger planes. A twice-delayed maiden flight is now scheduled for Sept. 21.
Even the U.S. government is involved. The Federal Aviation Administration, citing safety and the participation of so many U.S. firms, opened a bureau in Shanghai last year to help the Chinese win certification for the ARJ21 to fly in the U.S.
Canada's Bombardier Inc., which makes competing regional jets, is angling for a role in ACAC's development of a larger version of the aircraft. It has said it expects to invest $100 million in the larger jet, citing parts-sharing and cost-saving potential for its own jets.
The world's aerospace companies are eager to gain a foothold in a market where air traffic is expected to grow 8.9% annually by Boeing's forecast. Their participation could help China do in aerospace what it has done in industries ranging from toys to cars: move from a basic fabricator to a global competitor.
'We understand that they may well want to develop an indigenous industry, but we want to stay a part of it as long as we can,' says Clayton Jones, chief executive of Rockwell Collins Inc., Cedar Rapids, Iowa, which provides radios, navigation equipment and other avionics systems for the ARJ21. 'If I don't move in there, somebody else will,' he says.
A serious challenger to today's plane- and parts-makers is probably decades away. Passenger jets are extremely complex to design and build. The ARJ21, which lists for $30.5 million, has suffered several delays. Most recently, an equipment delivery delay forced the jet to miss a scheduled inaugural flight in March.
Boeing and Airbus already are offering a new generation of larger jets built from fuel-saving lightweight composite materials instead of the ARJ21's traditional metals. The ARJ21 is 'an important airplane for Chinese industry,' Boeing Commercial Airplanes President Scott Carson said at the Farnborough International Airshow in July. But he added, 'It's not a very exciting airplane and doesn't take you very far into the future.'
Still, the assistance of Western parts makers allows China's fledging aircraft makers to buy complex cockpit instruments and flight-control systems and focus on assembly, marketing and creating a much-needed after-sales support network. It also guarantees that Western companies will enjoy maintenance and support roles when the planes go into service. Chinese aviation officials expect to spend more than $600 million on the program; industry experts say they will likely spend much more.
The ARJ21, dubbed the 'Flying Phoenix,' has won 206 of the 300 orders that ACAC says it needs to break even. The Shanghai-based company touts the plane as well-suited for the high-altitude airports and lightly traveled air routes of western and central China, where Beijing has targeted economic development efforts. Chen Jin, ACAC's vice president for sales and marketing, says the aircraft manufacturer eventually hopes to sell the plane in emerging markets such as Malaysia, Turkey and India. It is preparing to open a sales office in Munich and is seeking air certifications for the jet in Europe.
The sales executive acknowledges there are hurdles to winning sales outside China. 'We don't have a very well-known brand, and we don't have a good after-sales service network,' Mr. Chen says. The global market for regional jets is crowded, with newcomers from Russia and Japan joining the fray against Bombardier and Empresa Brasileira de Aeronautica SA, known as Embraer.
But ACAC has strong domestic demand. Airbus estimates China will need $391 billion worth of new aircraft of 100 seats or more by 2026, and China's state-controlled airlines could favor domestic manufacturers at the expense of Western companies.
General Electric Co. foresees over the next 20 years a need for at least 500 regional jets in China, a figure that equates to more than $15 billion in engines, spare parts and services. 'That was enough to get us excited,' says Mike Wilking, president of GE's aviation business in China. GE supplies engines for the ARJ21. Parker Hannifin Corp., which makes fuel, hydraulics and flight control systems for the plane, expects 500 ARJ21s could earn it $275 million in revenue and at least that much in after-sales services. During the jet's design phase, Parker sent three engineers and a program manager to Shanghai from its headquarters in Irvine, Calif.
Components maker Goodrich Corp. has won key positions in several projects, providing wheels and brakes on a Russian-made jet, lighting on the ARJ21 and engine housings on Japan's Mitsubishi Regional Jet. Goodrich Chairman and Chief Executive Marshall Larsen said he has 'mixed feelings' about the situation.
Russia and China will need more than 20 years before they will pose a competitive threat, he says. But he adds, 'If they can put people in space, they'll definitely be able to build airplanes.'
Bruce Stanley / J. Lynn Lunsford |
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