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Key Takeaways

"Those who have knowledge, don't

predict. Those who predict, don't

have knowledge. "

Lao Tzu

We estimate that COMAC will

reach 70-90 aircraft

production annually by 2027-

2028. The market for C919 is

primarily contained to China

and client nations, and stands

around 700-800 aircraft.

COMAC will likely jump to a

new cleansheet narrowbody

design by 2035 at the latest to

ensure it provides a

technologically relevant

solution to global markets.

There is “no clear cut”

business case for the

797. Boeing needs to

concentrate on the upper end

of the MoM segment initially

to ensure maximum sales

traction.

MAX10 is not a one size fits all

solution but could generate

some reasonable sales, not

likely to exceed 250-300

aircraft

The next AIR letter will

examine the special mission

aircraft market and how

competitive fragmentation will

continue apace over the next

decade

Dragon Rising

C919 First Flight: many challenges ahead for COMAC The C919 is coming together as a programme at last. After many years of mostly self-inflicted internal delays, hesitations and supplier choices, the C919 took off on its maiden flight from the Pudong flight test center on 5 May. Unfortunately, many of the opinions that the aerospace community has expressed about the COMAC programme are either misguided or (beltway) biased. Firstly, C919 is not meant to be a direct competitor to either the NEO or MAX families. Technologically speaking, C919 is a mixed bag of older and newer technologies, including some less than optimized elements (structure and associated weight issues for example). However, the C919 that will enter service in 2020-2021 will continue to evolve. To formalize a definite or final opinion on the design so early on, as we have seen from some commentators, is misguided and deserving of a “Captain Obvious” rank. The Aviage avionics package (GE Aviation-AVIC) is potentially very capable, but will take time to mature and deliver. The engines are just as optimized as those found on Boeing or Airbus latest narrowbodies. But the rest of the subsystems are a mixed bag of advanced and previous generation designs. That said, C919 is only a prototype aircraft and as we know, this is only the tip of the iceberg. The principal risks to COMAC are transformational. The Chinese government has strategically positioned COMAC and AVIC as the entities that will lead China to become a viable aerospace industrial power in the future. The Chinese government’s role is eminently logical in this context. What it must do now is ensure that a much-needed restructuring of the industrial aerospace sector further accelerates. C919 is a transitional aircraft, at all levels, technologically, industrially and structurally. COMAC will need to continue to transform and shed some of its bureaucratic and organizational particularisms to ensure more efficient and rapid decision processes. In a few areas, COMAC is quite advanced when compared to its competitors (factory automation for example), but it needs to further transform to operate more efficiently industrially and operationally. COMAC will need to deliver on the aircraft specs, obviously, but performance characteristics are secondary to a demonstration by COMAC that the programme’s industrialization, supply chain integration, and management are equally on course for improvement. Also of critical importance will be the development of a support, marketing and sales entity that can grow and enable COMAC inside and outside China. This is a critical piece of the puzzle and represents a substantial investment that needs to happen sooner, rather than later. Once (and if) COMAC perfects all of this and more, which will likely take at least a decade, there is little doubt that China will have the basis to become a force to reckon with from the mid-2030s onward. COMAC ‘s supply chain is very much another challenge in itself. C919, C929 and C9XX will rely on a considerable number of western suppliers. But to truly become a world-class challenger, COMAC will need to transform its relationship with that supply chain and support the development of a local group of advanced technology suppliers as well. The supplier’s mix will evolve over time, but COMAC will need to increase its aircraft systems technological expertise to face off with Airbus & Boeing as equals by 2035. There are industrial, organizational, cultural and especially regulatory challenges that will certainly be complex to resolve. If the demonstrated Chinese learning curve with its space and military aircraft programmes is “your canary in the coal mine”, then there is little doubt that COMAC will get there. Politics and protectionism will then take on the baton to make the rise of the Dragon even more interesting to write about.

Eagle Pondering

Middle of the Market (temporary) Stall In the meantime, Chicago is still brewing the concept of the middle of the market aircraft for Boeing. This is not an

DRAGON RISING, EAGLE PONDERING, ROOSTER CRUISING

Michel Merluzeau

Director, Aerospace Market

Analysis | AirInsightResearch

mmerluzeau@airinsight.com

www.airinsightresearch.com

May 10-1 2017

AIRINSIGHTRESEARCH AIR12 ©2017 AirInsight

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easy, nor a simple decision, as this market is still undefined to a degree and competitive forces are still in motion. What is the 7M7? How does it fit in the product strategy and the enterprise strategy? How strong is the business case and what is the competition likely to do near to medium term that may affect its available market? Regardless of what the technical specifications of 7M7 will be, it is strategically critical that Boeing positions this aircraft optimally to ensure optimal sales traction vs the competition. Airlines are particularly keen on an aircraft with near narrow-body economics and “wider-body” capabilities. However, this is no trivial exercise for Boeing and engine suppliers who are at this juncture dealing with an unsettled business case. So where to go for now? Aim too low and Boeing positions itself vs the 321 family and its likely longer range derivatives. Aim too high and Boeing exposes itself to a response from Airbus with the lower priced and operationally capable A330neo, while likely also eroding the sales of its own 787-8. That is it for the simple element of the equation. But many more variables are important for operators including fleet integration, capex, residual value, financing, and services. Boeing needs to think about which battles it wants to fight at this juncture. It has a hefty 737 and 787 backlog that provides strong industrial visibility for the next five years. However, if the MoM approach

generates a less than optimal product strategy for its commercial division, combined with a probable market-optimized response from its

competition, it would likely negatively impact the company’s long term outlook.

Rooster Cruising

Wait and See

An election is always a defining moment. France’s newly elected president, former economy minister Emmanuel Macron, is a stabilising

event for Europe. Much uncertainty and confusion spread throughout a toxic and disappointing campaign, which at times made last’s

year US presidential election look like a boy scout meeting.

This election is hopefully going to ignite the stalled French economy and enable the French and European aerospace entrepreneurial

base to further unleash strong innovative talent that is looking for more access to financial resources and labor flexibility. If Macron can

deliver, the then-enabled startups will likely flourish over the next decade.

Next’s month parliamentary election will likely be the defining moment of his presidency; if he fails to gain a workable majority, then his

plans are likely to suffer from the “de rigueur” party line entrenchment s and the “ni-ni” (not this, nor that) that have plagued French

politics and its economy at large for now 36 years.

Airbus and its EU supply chain can benefit tremendously from some elements of Macron’s economic programme, since the next

generation of disruptive innovation will emerge in some part from this emerging group of companies. As these go through a process of

development, productisation and eventually consolidation, the future Dassault Systemes, ECEs or Liebherrs are just emerging. If Macron

is successful, they thrive, but if not, they will fall behind and cede market leadership to others. The weeks leading to the Paris Air Show

and the elections will be very interesting to watch.

Forthcoming Event

AIR & InfoAeroQuebec : AirInsight et Info Aéro Québec présentent ‘Program Outlooks

and Sector Dynamics Impacting the Canadian Industry to 2030’

Wednesday 17 May, Montreal Sheraton (YUL)