Bruce Andrews, Partner, and Connor Bernard, Analyst, at Middle Market aerospace and defence mergers and acquisition Bankers Alderman and Company, put the case for the Chinese airframe manufacturer challenging the dominance of the Boeing Airbus duopoly
The arrival of the COMAC designed C919 is potentially disruptive to the current duopoly of Boeing and Airbus in the commercial aerospace market.
Let us first give you a brief history and some design details and then we will discuss how we see the evolution potentially accelerating.
Fifteen years after its initial development, China’s state-owned Commercial Aviation Corporation of China (COMAC) C919 completed its maiden commercial flight on May 28, 2023, from Beijing to Shanghai, marking a significant milestone for the aircraft.
It had been a long road for the C919. In 2009, Chinese state media reported that the C919’s maiden flight could be expected as soon as 2014, but various delays due to production issues kept the C919 grounded until 2017.
The C919 faced further issues after the first Trump administration added COMAC to a military blacklist, barring all US investment in the company.
However, in November of 2021, the Biden Administration removed COMAC from the blacklist, paving the way for the C919 to receive its type certificate from the CAAC.
What followed was a period of accelerated progress for the aircraft after many years of issues and delays. In November of 2022, COMAC received 300 orders of the aircraft from seven different Chinese state-owned leasing firms.
The design of the current C919 is considered to be a conservative one, more similar to the 30-year-old design of the Airbus A320 than the more efficient A320neo and 737 max.
The structure consists of 8.8% third-generation aluminium-lithium alloy and 12% composites.
Currently, the base model of the C919 can fly up to 2,200 nautical miles, compared to around 3,500nm for both the A320neo and 737 max.
The centre wing box, outer wing box, wing panels, flaps, and ailerons are built in Xi’an, while the centre fuselage sections are built-in and aircraft and assembly are done in Shanghai.
Though Pratt & Whitney offered its PW1000G engine, COMAC ultimately chose to use CFM International’s LEAP-1C engine for the C919.
COMAC would like to integrate the Aero Engine Corporation of China’s (AECC) CJ-1000 engine, which the AECC expects to be certified by 2025.
The C919’s catalogue price is $99 million per aircraft, which is lower than the Airbus A320neo ($111 million) and Boeing 737 MAX 8 ($121 million).
These prices are often heavily discounted in actual sales and the C919’s competitive pricing is intended to attract budget-conscious airlines, especially in China’s domestic market.
The lower production costs are partly attributed to government subsidies and the use of established, less advanced materials and technologies.
We believe the C919 is unlikely to disrupt the dominance of Boeing and Airbus in the immediate near term.
However, with its government support and substantial orders from Chinese airlines, and the production delay problems at both Airbus and Boeing, we believe the C919 may have an opportunity to gain market share from the two powerhouses – Boeing and Airbus.
As for breaking into Western markets, the C919 first needs certification from the FAA and EASA. COMAC is steadily advancing toward EASA certification for its C919 aircraft.
In mid-2024, EASA conducted on-site evaluations, including tests of the C919’s Level D flight simulator, as part of the third phase of its certification process.
With positive feedback from these assessments, flight testing under EASA’s supervision is expected to begin in early 2025. Securing FAA certification, however, has proven more challenging.
COMAC began aligning the C919 with US Federal Aviation Regulations in 2018, but progress has been hindered by delays, including those caused by the pandemic and geopolitical tensions, not the least of which includes the potential for a Trump administration trade war with China.
The aircraft remains uncertified for US operations, with experts estimating it may take several more years to achieve approval.
These are significant hurdles, not to mention geopolitical challenges, but when COMAC can clear them, it could then potentially position itself as a serious competitor in the global market.
As middle market A&D experts we have already seen the impact of companies in this sector in the US and Europe, because of COMAC’s ability to rapidly grow the C919’s production rate.
The C919 backlog is increasing, demand for US and European components has been increasing, COMAC has begun setting up sales offices in other countries, and they have landed their first non-China based customer with Indonesia’s carrier Trans Nusa.
With Chinese resources and their well demonstrated military aircraft advanced designs and production rates, there is no doubt that the C919 and its derivatives will rapidly evolve to be fully competitive with Boeing and Airbus aircraft.
While a potential Trump administration trade war with China is of concern, our view and recommendation are for the US and European middle market commercial aircraft supply base to take the COMAC C919 seriously.
Both Boeing and Airbus are having difficulties delivering sufficient numbers of aircraft to their customers and COMAC will likely represent a viable alternative (especially for airlines in developing nations) and enable them to receive aircraft long before Boeing and Airbus can deliver.
The time for American and European middle market aerospace companies to strengthen their business long-term is now by embracing COMAC as a customer, despite the potential trade war uncertainties associated with this approach.
We believe that having COMAC as a customer may enhance the value of middle market A&D suppliers.
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