Filed under: International markets, Products and services, Industry, Competitive strategy, China, Boeing Co (BA), Headline news
Several leading business journals have reported that China has created its own regional jumbo jet company to compete with Boeing Co (NYSE: BA) and Airbus.
The Financial Times (subscription required) reports, “China has unveiled a state-owned aircraft manufacturer intended to eventually challenge Boeing and Airbus’s control of the global market in massive airliners.” The Times characterizes the Commercial Aircraft Corporation of China (CACC) as “a significant step in Beijing’s drive to create an advanced civil aviation manufacturing sector able to help meet the country’s rapidly growing demand for regional and larger jets.”
Reuters noted that, “many analysts have expressed skepticism about the commercial prospects of a large jet designed and manufactured entirely in China, given the country’s limited experience in massive aircraft.” Not sure what analysts know, I’m skeptical just as much of them.
According to Bloomberg, “China aims to build a 150-seat aircraft by 2020 to support the expansion of its domestic travel market and to compete with Boeing and Airbus overseas.” In terms of expansion, the country plans “to triple its fleet of passenger and cargo planes to 4,000 by 2020 as economic growth lifts travel demand in the world’s second-largest aviation market, according to the General Administration of Civil Aviation.”
It should be of no surprise to anyone that China would pursue the expansion of its aviation industry. While some may scoff at China’s current technological ability, it would be an error to underestimate the capability of a focused and well-financed competitor. In terms of the time frame for this fledgling industry that too is not truly relevant — it isn’t a race and whatever they develop, and whenever they develop it — it will be more than they have now. They have the market size and they’ll gain market share.
They’re also prone to gain from reverse engineering of Boeing and Airbus designs, saving R & D money all along the way. This story will be playing out over decades.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.He writes the columns Chasing Value and Serious Money.
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