US economy

Boeing’s crisis may open gap for Chinese jets to fly through


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Boeing’s 737 Max crisis may turn out to be the long-awaited break for China’s first homegrown jet maker.

The unravelling of Boeing’s reputation, following the mid-air blowout of a Max 9 door plug on an Alaska Airlines flight last month, comes just as Comac, also known as Commercial Aircraft Corp of China, prepares to push its business overseas.

This week will be big for the company, whose aircraft include the C919 single-aisle jet. Comac on Tuesday made its international air show debut in Singapore and also signed a significant order from Tibet Airlines for 40 C919 jets and 10 of its smaller ARJ21 aircraft.

Beijing has long wanted self-sufficiency in key industries, including chipmaking and aircraft manufacturing. It has made significant progress on the latter. After well over a decade of investment and development in the sector, Comac brought the 164-seater C919 jet into service last year. Two models of its jets, the C919 and ARJ21 made flights outside of mainland China to Hong Kong in December.

It has received brisk orders from local airlines such as China Eastern Airlines — the first buyer to use the aircraft to fly between Beijing and Shanghai — and HNA Aviation Group, the parent company of Hainan Airlines, which operates 12 airlines.

But until now, challenging the duopoly of Airbus and Boeing has seemed remote, if not impossible. For a start, the production of the C919 still relies on some key components made in Europe and the US.

Scrutiny of Boeing following January’s incident, and broader concerns about its corporate and engineering culture, may prompt airlines with frequent flights to China to consider Comac. US aviation regulators have increased inspections and blocked Boeing from expanding production of the 737 Max, its most popular plane.

US and European airlines are unlikely to buy Chinese planes. But demand for air travel is booming in south and south-east Asia, regions less sensitive to US-China tensions, where budget carriers are expanding rapidly. This means Comac may find buyers outside China faster than expected.

The need for Chinese airlines to find an alternative to Boeing, which has close links to the US government, is rising along with escalating US-China geopolitical friction. There would be cost savings too: the C919 is estimated to cost at least a quarter less than imported counterparts. Given three of the largest carriers, Air China, China Southern Airlines and China Eastern Airlines, are also state-owned, the savings could end up being much bigger.

This looks a rare chance for Comac to take market share, albeit a small slice, from the Airbus-Boeing duopoly. State-owned Comac was established jointly with companies including Shanghai-listed Aluminum Corporation of China, China Baowu Steel Group and Sinochem Corporation. These companies, as well as local airlines, are the ones that stand to benefit.

Lex is the FT’s concise daily investment column. Expert writers in four global financial centres provide informed, timely opinions on capital trends and big businesses. Click to explore



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