China Inc's Boeing rival just won't fly: What is making the dragon nervous?

It’s generally seen as a good thing for an aircraft manufacturer when an airline plans to buy its planes. So Commercial Aircraft Corp. of China Ltd. – the country’s would-be challenger to Boeing Co. and Airbus SE – should have a lot to celebrate.

Ghana’s Africa World Airlines Ltd. may agree to buy two of Comac’s ARJ21 regional jets this month, the carrier’s Chief Executive Officer John Quan told Moses Mozart Dzawu and Bruce Einhorn of Bloomberg News in an interview.

That looks like a fillip for Comac, especially considering the problems of Boeing’s 737 Max, which was grounded by Beijing’s regulators after two crashes in five months and now will be potentially excluded from a China-U.S. trade deal. The Chinese manufacturer would like to disrupt the existing commercial aircraft duopoly. Overseas purchases for the ARJ21 look like a step down that road.

Not so fast. Such a small order – from an airline part-owned by China’s debt-ridden HNA Group Co., no less – is hardly a ringing endorsement for a plane that’s been in development for the best part of two decades. Moreover, the travails of the 737 Max demonstrate just how challenging developing new aircraft is in the 21st century, let alone for a newcomer like Comac.

About 60 per cent of global air traffic passes through Europe or the U.S., and the two regions will still account for about half of the total by 2037, according to Boeing. As a result, it’s essential for any manufacturer seeking global relevance to get its planes certified as airworthy by the Federal Aviation Administration or European Aviation Safety Agency.

Without that piece of paper, aircraft are excluded from swaths of the world’s aviation market. That’s both a near-term problem – removing flexibility for global airlines in how they deploy their fleet – and a long-term one, killing off the bulk of the secondary market that carriers depend on for selling their worn-out aircraft.

With all their expertise at rolling out new models, Boeing and Airbus still struggle to complete that type certification in less than five years. One of the questions needing answers around the 737 Max is whether Boeing’s attempts to speed that process led to safety failures.

Comac first lodged an application for its would-be 737- and A320-killer, the C919, with the European regulator in 2016, so the best it could hope for would be to see approval some time in 2021. In the case of the ARJ21s being sent to Ghana, the process of winning certification from major regulators proved so challenging that Comac ultimately gave up. When the Republic of Congo – not exactly a major aviation market – became the first foreign country to award a type certificate two years ago, the manufacturer regarded it as enough of a milestone to put out a press release celebrating the fact.

Progress on getting the C919 certified seems to be going slowly, too. Comac plans to carry out 4,200 hours of flight tests, but the third of six planned prototypes took its maiden flight only in December and the rest won’t be ready until later this year. Flying all six for an hour a day, 365 days a year would require two years of testing alone, and even that looks ambitious. Existing prototypes are laid up undergoing modifications for as long as three months, the state-run China Daily reported last month. That could seriously push back the timetable.

If everything goes to plan, it’s possible to see the C919 getting its paperwork in order before the start of 2022 – but at this rate, a date closer to 2025 would hardly be surprising. At current targeted production rates of around 60 a month for the A320neo and 737 Max, there will already be little shy of 10,000 competing Airbus and Boeing planes in the air by that time, and Boeing’s planned new midsize aircraft could be nearing its first deliveries.

Meanwhile, with maximum ranges about a third less than its competitors and the capacity to carry only about three-quarters of the weight of passengers and cargo, the C919 will be looking a generation out of date. Given it’s largely made of parts from conventional suppliers such as Honeywell International Inc. and General Electric Co., it’s going to be supremely challenging for Comac to find the cost savings necessary to undercut Boeing and Airbus outside China, where airlines will be more or less obliged to support the homegrown hero.