Three of the main airlines in China are putting off deliveries of over 100 Airbus and Boeing aircraft. Still, they have kept every single order for planes made by domestic aircraft manufacturer the Commercial Aircraft Corporation of China (COMAC). During difficult times, the airline industry’s move highlights COMAC’s strategic importance to the Chinese airline industry.
According to Nikkei Asia, Air China, China Eastern Airlines, and China Southern Airlines have held off taking delivery of 58 planes from Boeing and 53 from Airbus in 2020. China Southern Airlines put off taking 44 planes while China Eastern Airlines did not take 43 and Air China 24. China Southern, the largest airline of the three, had planned to take 86 new aircraft while disposing of 37 to give it a fleet size of 911 planes by the end of 2020. In the end, it only added five new planes leaving its fleet size at 867. Both China Eastern and Air China were looking to increase their Airbus fleet size by 37 and 31 respectively, but in the end, they only took nine planes each.
COMAC was the big winner
The big winner was Shanghai-based COMAC who managed to sell 12 ARJ21 regional jets to state-owned airlines and their subsidiaries. In 2020 half of all COMAC’s deliveries went to the big three state carriers, with the remainder going to domestic carriers China Express Airlines, Genghis Khan Airlines, and Chengdu Airlines. When speaking to Nikkei about why the three big Chinese carriers had done this, transport and economics professor at Hong Kong Polytechnic University Fu Xiaowen said:
“Chinese airlines’ purchase of ARJ21 is not a pure business decision,” adding, “Under a normal situation, Chinese airlines will continue to buy COMAC.”
A finance professor at New York University Shanghai David Yu, echoed that view saying:
“There will definitely be more continued support for COMAC,” he said. “The question is just how fast and how much more addition.”
China wants to support COMAC
The Chinese government established COMAC in 2008 to manufacture domestically built aircraft that could compete with American and European giants Boeing and Airbus. The company is central to China’s ambition to build mid-to-large-sized commercial aircraft.
While visiting COMAC’s factory in Pudong, Shanghai, last October, the head of the Civil Aviation Administration of China Feng Zhanglin said:
“The CAAC will do everything in its power to support the nationally built civil aircraft business.”
China’s state-owned airlines are central to COMAC’s order book, with China Eastern pledging to buy 20 ARJ21s while also being the launch customer for the much-awaited C919, an aircraft designed to compete with the Airbus A320 family and Boeings 737. Meanwhile, China Southern Airlines has pledged to purchase 35 ARJ21s by 2024.
Despite pressure on the state carriers to buy Chinese planes, they will not walk away from Airbus and Boeing. Professor Yu at NYU Shanghai thinks that most of the 2020 undelivered Boeing and Airbus aircraft will be deferred for later years, saying:
“There is growth in the local market and there will be demand.”
Airbus and Boeing are the only options
He concludes that the COVID-19 pandemic has pretty much shut down international passenger flights, skewering demand towards narrowbody jets that can be used for domestic flights.
In the long run, Fu believes that the state-owned airlines will merely defer the orders with Airbus and Boeing as in the long run, the aviation market has a bright future. This means that getting planes from Airbus and Boeing remains the only realistic option for Chinese carriers.
“The eventual decision also depends on the penalties associated with cancellations,” Fu added.
The professor is right about the two big planemakers being the only realistic option for now, but it will be interesting to see what part the C919 will play when it becomes available.
What do you think about Chinese airlines deferring deliveries of Boeing and Airbus planes but not COMAC? Please tell us what you think in the comments.