FORTUNE: CHINA’S C919 JETLINER WILL CHALLENGE AIRBUS AND BOEING
Comac (Commercial Aircraft Corp. of China in Shanghai) is an aviation experiment on a scale the world has never seen. The five-year-old company aims to produce jetliners in less than a decade. China’s government pumped $3 billion into the new venture, promising much more, in a bid to overcome the country’s dependence on Boeing and Airbus, which control 70% of the world market. Comac announced that its first jet would hit the skies in just six years, in 2014.
In some ways China has little choice but to get into aerospace. Airbus expects Chinese airline-passenger traffic to pass that of the U.S. by 2032. Boeing says the country will buy an additional 5,580 planes, valued at $780 billion (nearly the number of commercial planes that exist in the U.S. today) over the same time. A country flush with $3.7 trillion in foreign exchange reserves would rather spend billions on the risky proposition of creating an airplane industry than continue spending billions in plane orders to the U.S. and France.
China does have more than a passing knowledge of airplanes: it’s been a key supplier of aircraft parts for years. Comac constructs a tail section of Boeing’s 737 and cargo-door frames for the A320. Since 2009 the Chinese have put together more than 130 A320s as part of a joint venture. But aerospace is a tricky business. Success rarely goes as planned. Aerospace in China mostly sputtered until the late 1970s, when the Chinese produced a large jetliner called the Y-10, modeled after Boeing’s 707. It was shut down after just one plane flew.
Shanghai’s past failures matter little now because building a modern airplane has become an exercise in outsourcing. Suppliers provide almost all the key components while Comac handles design and assembly.
In recent years China has learned it can’t build motorways fast enough to connect millions of people in large eastern cities with the west. Between 2011 and 2015 China will have constructed more than 80 new airports and expanded another 100, according to China Daily. In far-flung cities like Shennongjia, in central Hubei province, workers have blown the tops off mountains to build new runways. 46 airlines operate on the mainland. Of Comac’s 400 orders for the C919 planes, almost all come from Chinese companies.
The sale price of a C919 will come around $75 million, about $10 million less than the next generations of the Boeing 737 and the Airbus A320. Analists speculate that the price might be low enough to lure low-cost Western airline if the C919 ends up being similar in efficiency to the competition. The industry was thoroughly skeptical when Ryanair CEO Michael O’Leary announced in 2011 that Ryanair (one of Europe’s most profitable airlines) would cooperate with Comac, and may become the first Western airline to place an order.
Will passengers fly on a Chinese jet? “99% of my passengers don’t know what kind of aircraft they are getting on” O’Leary says . Even today fliers may not know they are flying on a Brazilian jet between New York and Washington. Embraer, based in Sao José dos Campos, has become. a trusted brand, after prideful aviation executives in the 1980s scoffed at the idea of anyone ever flying Brazilian. Some skeptics are doubtful that C919 will ever fly. Many others think Comac will gain momentum over the next decade. “It took Airbus 20 years to come up with the A320, which made Airbus. It won’t take the Chinese that long” , says Eddy Pieniazek, chief adviser at aviation advisory Ascend. Insiders say that a realistic date for C919’s first flight may be 2015 or 2016.
Fortune’s Scott Cendrowski