China wins 100 orders for first jetliner

ZHUHAI, China Tue Nov 16, 2010 2:40pm EST

1 of 2. Visitors queue to see a scale model of Chinese-made C919 passenger jet which is on display at the 8th China International Aviation & Aerospace Exhibition or 'Airshow China 2010' in Zhuhai, Guangdong province, November 16, 2010.

Credit: Reuters/Stringer

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ZHUHAI, China (Reuters) - China announced a 100-plane order for its first commercial jetliner, a first step in its ambitions to challenge Airbus EAD.PA and Boeing (BA.N) for a slice of a global market worth $1.7 trillion.

State-owned COMAC, or Commercial Aircraft Corp of China, unveiled the orders at the country's largest air show on Tuesday, ending a dearth of orders in the two years since it launched designs for the 150-seat C919.

As air travel expands with a billion Chinese predicted to be flying for business and leisure early next decade, China wants to reduce its reliance on foreign planes and foster a domestic industry worthy of a country capable of putting a man in space.

COMAC said the orders came from four Chinese airlines, which was no surprise given government encouragement for the project, but also the leasing arm of General Electric (GE.N), which will supply the C919 engines together with France's Safran (SAF.PA).

It is the first time buyers have committed to the aircraft, which COMAC expects to start building next year, followed by a maiden flight in 2014 and first delivery in 2016.

"The customer signing lays a market foundation for the C919, which has smoothly entered the engineering development phase," COMAC Chairman Zhang Qingwei said in a statement.

Officials did not give a value for the deal or break down the orders by airline.

A similar deal for Airbus or Boeing jets would be worth about $7 billion at list prices, but aircraft are normally sold at a discount of at least 20 percent and analysts said China would have to work hard to woo foreign airlines.

COMAC aims sell 2,000 C919 aircraft but engine maker CFM International, co-owned by GE and Safran, said it expected about half that. This is still a third of the market forecast by Boeing for aircraft in that size category over 20 years.

China is just one potential challenger for Airbus and Boeing with Russia, Brazil, Canada and Japan all working on designs.

But Airbus signaled it would fight to maintain its position as the world's largest planemaker ahead of Boeing.

"We were born into competition 40 years ago and now we are number one. Frankly we are used to it. Where's the big deal?," Airbus's top China executive Laurence Barron told reporters.

Separately European-based Airbus announced an order for two A330s and six A321s from TransAsia Airways.

CHINA'S TOP THREE AIRLINES

As the country's first homegrown large commercial aircraft to enter full development, the C919 is intended to compete with Boeing's 737 and Airbus's A320 in the narrow-body segment. Boeing expects that segment to generate total worldwide sales of more than 21,000 planes worth $1.7 trillion over the next 20 years.

Analysts said foreign airlines would be skeptical about buying the plane until it had proven itself in service, but Tuesday's signing is the biggest breakthrough for the politically sensitive project since it was launched in 2008.

Sales of a smaller regional jet, the ARJ21, which makes its debut at the show, have been described as disappointing.

An attempt to mimic the Boeing 707 with the Shanghai Y-10 foundered in the 1970s due to a backward-looking design and never got past prototype stage but the C919 aims to use some of the new fuel-saving technologies available to Airbus and Boeing.

Buyers for the C919 announced on Tuesday included the country's three top airlines Air China (0753.HK), China Eastern (0670.HK) and China Southern (1055.HK), as well as HNA Group, the parent of Hainan Airlines (600221.SS).

GE's leasing arms GECAS, owner of one of the world's biggest airliner fleets, agreed to buy an unspecified number of aircraft, as did the financing arm of China Development Bank.

Experts said the involvement of GECAS signaled China's determination to win acceptance abroad -- but efforts to woo international support suffered a glitch when foreign journalists were banned from attending the signing ceremony.

"GE will want to back their engine and their commitment may also help persuade the (U.S.) Federal Aviation Administration to support certification of the aircraft," said Bradley Perrett, Asia-Pacific bureau chief of specialist magazine Aviation Week.

"The FAA's support will be critical for selling the aircraft to airlines in developed economies."

Boeing forecasts China will triple its airplane fleet over the next 20 years, making the country the largest aircraft market after the United States.

Goldman Sachs said this week that Chinese air passenger traffic could reach 1 billion people per year by 2022.

COMAC said it expects China to take delivery of almost 4,400 airplanes worth about $500 billion over the next 20 years as global passenger demand rises by an average of 5.2 percent and passenger traffic grows by 7.7 percent.

(Editing by Chris Lewis and Lincoln Feast)

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Comments (5)
fromthecenter wrote:
Here’s another example of China’s trade policies… I love the fact that the rest of the world thinks the Chinese government will let their people become consumers of products made elsewhere. The only thing that the chinese will allow is jobs to be shipped from the rest of the world. Until the rest of the world wakes up… This will continue until there is little to nothing but scraps left.

Nov 16, 2010 4:19pm EST  --  Report as abuse
kc10man wrote:
McDonald Douglas actually built the assembly facilities way back in the day before Boeing bought them out. Great idea to help develop new competitors.

Nov 16, 2010 7:33pm EST  --  Report as abuse
ExRA wrote:
China has been spending billions buying planes from Boeing and Airbus. What is wrong with buying home made product IF that product is better and cheaper than foreign ones? Why is this a bad trade policy when it comes from China only and not a bad one when it comes from others? The engines of these Chinese planes are still made by GE in USA and the steel are from the Australian mines. This is how international trades are conducted with fair minded people and source products from countries with best capabilities in that respect. The consumers are the winners in this. It would only be a bad “policy” if the Chinese government insisted the engines of the planes must come from Rolls Royce. RR does make great engines and not a comment on the A380 problems. The RR product lines simply do not fit the Chinese planes.

Nov 16, 2010 11:47pm EST  --  Report as abuse
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