No Boeing. China, India & Russia Will Build The Belt & Roads Civil Passenger Aircraft
Op/Ed by Chris Devonshire-Ellis
Stories have been hitting the media in the United States and Asia concerning Boeing considering the development of a new Boeing 797 aircraft targeted at the “Belt & Road and China”. Boeing’s Marketing Director, Randy Tinseth has stated that Boeing sees potential for an aircraft that would make more routes viable between nations involved in the BRI – something that could fly on medium range routes where the 737 is too small to accommodate airlines’ needs and the larger 787 are too big and costly to fly. “China is a little bit unique in that it has misused a lot of wide-body planes.” Tinseth said on the sidelines of an aviation conference on the trade initiative. “A middle-of-the-market airplane would better allow them to optimise that process, so it’s an opportunity in China, no question.”
It is true that regionally, the Belt & Road is in need of a supportive passenger jet, given that the 737 is too small for many routes and the 777 too large. Growth demographics also dictate that China is expected to become the world’s largest aviation market by the mid-2020s, and is expected to buy some 7,690 planes. Cathay Pacific Airways, one of Asia’s biggest carriers and Hong Kong’s flagship airline, part owned by the Chinese Government has also chipped in and stated that a medium-haul plane might not be necessary due to limited appetite for new flights along belt and road routes, but this was in part because many governments in Central Asia have been reluctant about handing out flying rights to foreign airlines. As economic growth increases, that demand would likely rise.
This news needs to be taken with some background intelligence. Firstly, and the most easily obvious is Boeings need to develop a share recovery strategy given two of their new 737’s have recently crashed, with the faults in both suspected to be problems with flight software overriding pilots corrections. Lawsuits are expected to run into billions of dollars if Boeing are proved culpable and the planes proven to be defective or unproven. The incidents have also highlighted the apparently cosy relationship between Boeing and its governing body, the US FAA, who were supposed to be regulating the safety of such aircraft. Tinseth’s words, somewhat remarkably for an American company in acknowledging the Belt & Road at all, may then be taken with a pinch of salt as he also wrestles with Boeings reputation and recent damage done to its stock price as a result of the accidents.
Senior US executives also often appear out of touch with China realities – I recall a very well known American auto executive from one of the most well known brands proclaiming that “China would never overtake the United States in auto production.” Three years later, the Chinese did just that. Is Tinseth really that up to speed with the Belt & Road regions?
The issue with the Belt & Road is that it is, by and large, a Chinese initiative and they will use that opportunity to sell whatever products they can throughout the region. What China lacks is technology and to some extent confidence – the current limit has essentially been reached as to what you can do with existing aviation technology until there is a fundamental change in engine design requiring a reboot. The Chinese already have the latest Boeing and Airbus aircraft and are familiar with the technology. So too are their larger neighbors, Russia and India. With China alone needing close to 8,000 new aircraft and India and Russia not far behind, there is no way any of these countries will allow the EU or United States to continue their joint market dominance. And indeed, steps are already being taken to ensure the region manufacturers its own aircraft. China has already launched its Comac C919, (pictured above) which can carry up to 168 passengers and will compete with Boeings 737 and the Airbus A320. It is early days while Comac gets its maintenance, supplies and engineering infrastructure in place to service China’s already massive air traffic market, but for sure as a state owned industry it will not be long before the Chinese government introduce then to China’s own civil airlines. They will be patient, the last thing they want is any hint of problems with the aircraft. However the provision by Comac to service Chinese air passengers will, and is happening.
Comac is not the only player. China and Russia have jointly formed the China-Russia Commercial Aircraft International Corporation (CRAIC) a JV between Comac and Russia’s UAC, with a new wide body jet, the CR929 now in production. That aircraft is expected to be ready by 2025 and will carry up to 280 passengers. UAC have also launched their mid-range MC21-300 recently from their plant in Irkutsk. Nearby Baikal Airport is expected to become a regional air transport hub servicing South-East Siberia. At the other end of the scale, a China-Russian JV catering for small commercial light aircraft is also underway in Ordos, Inner Mongolia.
India too, is becoming a player. Like China, set to become one of the largest aviation markets in the world by 2030, it too is reaching out to being involved in aircraft production. Denis Manturov, Russia’s Industry and Trade Minister, recently stated that Russia would welcome Indian partners in joint collaboration on the Ilyushin Il-114 medium-haul turbo-prop airliner, which is designed for local routes and can carry up to 64 passengers. The aircraft is about to recommence production in Moscow following the relocation of the assembly facility from Tashkent in Uzbekistan. The aircraft could be sold on both Russian and Indian markets, Manturov stated. India is set to partner more frequently with existing manufacturers, and especially with the Russians and Chinese but given 20 years may be in a position to finance the development of all or part of its own jet airliners.
The implications are clear. With China, India and Russia all heavily invested in one way or another in the development of the Belt & Road region (although India will not officially endorse the initiative) a market is in the process of being created that will both need and then demand access to communications and trade. Aviation is also a primary industry both employing large numbers of people, requiring technical competencies and leading the development of domestic supporting industries and their competencies. Beijing, Moscow and Delhi are well aware of this. Boeing meanwhile can dream, but rather like the American auto executive who got it wrong about China, they are already being out thought in the race to provide emerging Eurasian with aircraft.
Silk Road Briefing is produced by Dezan Shira & Associates. Chris Devonshire-Ellis is the practice Chairman. The firm has 26 years of China operations with offices throughout China, Asia and Europe. Please refer to our Belt & Road desk or visit our website at www.dezshira.com for further information.