China’s New Plane Wins Two Big Orders: Should Airbus and Boeing Be Worried?
Chinese efforts to break the Airbus and Boeing duopoly took another step forward on Monday as one of the nation’s largest airlines agreed a major order.
China Southern is buying 100 locally built C919 planes. The carrier is China’s biggest domestic operator and also boasts a large international network.
The C919 is produced by Commercial Aircraft Corporation of China (COMAC), a state-owned firm founded in 2008 to develop passenger airliners. The plane is considered an emerging competitor to Airbus’ A320 and the Boeing 737.
While COMAC’s first product, the ARJ21, has only chalked up around 130 deliveries to date, there are much higher hopes for the C919.
Just last week, Air China signed a similar agreement with COMAC for 100 C919 jets. It means all three of the nation’s largest airlines now have major orders pending for the aircraft.
The C919’s Delivery Advantage
China Southern’s new C919s will be delivered in stages from 2024 to 2031. This short lag time between an order and first delivery gives COMAC a big commercial advantage over Western rivals. Both Airbus and Boeing have long waiting lists, with delivery slots booked out until the end of the decade.
However, this step up on international competitors could be short-lived. The C919’s engines and many of its systems come from foreign suppliers.
China’s Global Times newspaper reported that at least 40% of the components of the aircraft are internationally sourced. This means COMAC could yet run into worldwide supply chain headaches that are plaguing its more established rivals, especially as it ramps up production.
China Southern’s C919 Discount
COMAC’s list price for the latest deal was approximately US$9.9 billion, comprising the aircraft itself and associated engines.
However in a market filing, China Southern confirmed that a discount was negotiated. Variations from the catalog price are commonplace in the airline industry, particularly for such large orders from high-profile customers.
“The board believes that the degree of price concessions afforded to the group in the acquisition is comparable to the price concessions the group has obtained in similar transactions in the past,” said the Chinese-language filing.
The discount referenced in Monday’s China Southern deal appears to echo that of China Eastern. In September 2023, the airline also bought 100 C919 jets, with Reuters reporting a “substantial discount.”
China Eastern was the launch customer for the C919. It currently has five in its fleet of more than 600 aircraft. All of China’s biggest airlines maintain large order backlogs with Airbus and or Boeing.
The Start of a Broader Shift?
Chinese airlines buying locally built aircraft is nothing new. The more significant development comes if, or possibly when, short delivery times, aggressive pricing, and a competitive product make international carriers more tempted to buy the C919.
Before this latest deal, COMAC had around 1,100 orders for the C919, mainly from Chinese aircraft leasing companies and airlines. International operators, at least for the time being, seem less keen.
In March, Air Lease executive chairman Steven Udvar-Hazy said he wasn’t interested in Chinese planes. He described discussions as “a one-way dating relationship.”
The plane made its first flight in 2017 after years of delays. At present, only the Civil Aviation Administration of China has certified the new jet to fly in passenger service.
Udvar-Hazy said he did not believe the Federal Aviation Administration or the European Union Aviation Safety Agency would approve the C919 for commercial flying in its current form, casting doubt on its appeal among Western carriers.
Meanwhile, Christian Scherer, the CEO of Airbus’ commercial aircraft division, previously said the C919 was “not going to rock the boat.”
However, Boeing’s Asia-Pacific commercial marketing managing director Dave Schulte said the U.S. plane maker is factoring in competition from the C919 in its long-term forecasts.
