With Western airlines predicting that it will take years to recover from Covid-19, aircraft manufacturers are dependent on the resilience and growth potential of the Chinese market. But China’s aerospace ambitions and the geopolitical tensions surrounding them could make it an eventful race.
China has recovered from the pandemic to become the world’s largest domestic aviation market. Traffic is 8% higher than a year ago, according to data from Oliver Wyman’s PlaneStats. In the United States and Europe, it is still down 41% and 68%, respectively.
With an additional 500 million Chinese expected to join the middle classes over the next few years, the country is also the industry’s great growth opportunity. The International Air Transport Association predicts an average annual growth of 5% in passenger travel in the Asia-Pacific region between 2019 and 2039. Mature Western markets are expected to experience growth of 2.2%.
After a slight liberalization of its airline industry in 2004, China has become the second source of income for the two major aircraft manufacturers, Boeing and Airbus, which have since opened factories there. It’s also one of their few bright spots: In November, Boeing downgraded its 20-year global aircraft demand forecast by 2%, but improved China by 6.3% to 8,600 aircraft. .
Compared to the rest of the world, China is particularly important to the Boeing 737 and Airbus A320 families, which are the backbone of low-cost airlines. It accounted for a quarter of deliveries for the 737 MAX, which Boeing is working to resale after a 20-month grounding.
China’s real catching up potential, however, lies in the long-haul routes, and therefore the widebody jets most affected by Covid-19. Traditionally, only the A330 has been widely accepted by major Chinese public carriers. Current orders, however, are ultimately skewed towards the more agile A350 and 787 aircraft that Airbus and Boeing are focusing on.
The backlog underestimates how many planes China will need. The country accounts for 4.4% of the combined firm orders of Boeing and Airbus, which seems far too low. As Barclays analysts point out, that suggests fewer than 20 A320 deliveries in 2023, compared to a recent annual average of 120.
The alternative, feared by Western companies, is for the narrow gap to be bridged by the C919, made by Chinese state-owned manufacturer Comac. Ironically, its development would have been difficult without the help of foreign manufacturers which it could now put at a disadvantage.
Granted, the C919 is delayed and likely won’t enter service until the end of 2021, with limited initial production capacity. Its international adoption is limited by a shorter lineup and worse customer service than its peers. But this is the key to Beijing’s “Made in China 2025” industrial plan. This should not be underestimated, especially in the second half of the decade. The Chinese government can sell the plane at very low prices, and it owns a lot of it. customers.
The outcome can be determined by geopolitics. A few days ago, the Commerce Ministry released a list of Chinese companies with military ties that will be banned from purchasing a range of American products and technologies. It included some subsidiaries of Comac, potentially dealing a blow to the C919. It’s unclear whether President-elect Joe Biden will maintain such a hard line, but Beijing could hit back by refusing to dig up the MAX.
The dependence of Western aerospace on the Chinese market has never been greater. Neither has the risks for its continued domination.
This story was posted from an agency feed with no text editing.