The global commercial airliner market has been a duopoly for over 30 years; Airbus and Boeing rule the domestic and international skies, with 99% of the market share. Would-be usurpers need more funding, expertise, influence, a track record, and the ambition to force market turbulence. However, that memo has not been read in Beijing as the Commercial Aircraft Corporation of China (COMAC) takes to the skies as a rival to Airbus and Boeing.
Founded in May 2008, COMAC is the brainchild of the Chinese government, with multiple highly capitalized state-owned enterprises as investors. The company’s mission to “let China’s large aircraft fly in the blue sky” is underway; its C919 commercial airliner had its maiden flight earlier this year in May. Unlike other challengers to the Airbus-Boeing hegemony, COMAC has one significant advantage: an exclusive playground. China currently boasts the world’s second-largest aviation market, which in two decades is forecasted to be the top aviation market in the world. A closed market, a buy-made-in-China policy, and an aggressive pricing strategy are significant tailwinds; China Eastern Airlines recently committed to ordering 100 C919s, a transaction worth $10 billion. In addition, neighboring regional markets are also in play with potential customers. Confidence is high, but success is far from guaranteed.
Airbus and Boeing each possess the infrastructure to produce one hundred planes monthly, relationships with the world’s best components and parts vendors, legions of experienced engineering and technical talent, order backlogs, and customer goodwill. Airbus and Boeing’s success saw them outperform the S&P 500 annually in the decade leading up to the 2019 pandemic. Officials at both companies recognize China’s threat and opportunity and are maneuvering accordingly. Experts believe COMAC is miles away from posing a credible challenge, barely able to produce two planes a month. But time is on the Shanghai-based manufacturer’s side. Before the current duopoly, Boeing ruled the skies. Established in 1970, 54 years after its transatlantic rival, Airbus took almost as long to reach parity and overtake Boeing. It will undoubtedly take COMAC less time to become a significant force, but time is just what it needs. Therefore, it is good that COMAC has not read the memo regarding what it lacks to compete and is writing its own rules for emerging on the scene and cruising at 40,00 feet.