Analyst: Competitors like China are little threat to Boeing, Airbus

LYNNWOOD — The obstacles facing newcomers in the aerospace industry are so great that new competitors have little chance of seriously challenging the Boeing Co. and Airbus in the next decade, a noted industry analyst said.

Teal Group Vice President Richard Aboulafia said he expects China’s Comac will deliver only eight of its new C919 commercial jets — “not eight a year, just eight” — over the next decade.

Canada’s Bombardier will do better with its CSeries jets, but his projection of 32 deliveries a year from the company is dwarfed by the hundreds of competing 737s rolling out the door of Boeing’s Renton factory, as well as the similarly sized A320s proposed by Airbus in Europe.

“When you’re up against two guys that both have more than $300 billion in backlog, it’s really hard,” Aboulafia said. “This duopoly thing seems to work.”

Aboulafia was the keynote speaker Wednesday at the Pacific Northwest Aerospace Alliance’s annual conference. The event drew more than 400 representatives from aerospace companies in Washington, Oregon and British Columbia.

Much has been made in recent years of efforts by the Chinese and Canadian companies to elbow their way into the passenger jet market now ruled by Boeing and Airbus.

Boeing executives have stressed the need to remain competitive as they tried to justify cutting retirement benefits for engineers and technicians belonging to SPEEA, the Society of Professional Engineering Employees in Aerospace. On Wednesday, Boeing’s vice president in charge of supply chain management, Stan Deal, warned suppliers at the PNAA conference that competitiveness will be a consideration as Boeing awards contracts in the future.

But Aboulafia said that Comac and Bombardier aren’t likely to be threats to Boeing and Airbus market dominance any time soon.

“I’m not projecting any challenge in the 10-year time horizon,” he said.

Comac, he said, has been plauged with development problems on its first airplane, the ARJ21 regional jet. The plane is behind schedule and not close to meeting its performance goals.

But instead of learning from their mistakes, the Chinese are following the exact same path the led them to fail the first time, Aboulafia said. “I’n not a believer.”

Bombarider, on the other hand, has developed a strong performer with its CSeries jet. But the Canadian company is struggling to book orders for it.

The reason, he said, is the market dominance Boeing and Airbus enjoy. Because they produce jets in such great volume — 80 single-aisle jets a month between the two of them — it’s easy for them to offer price discounts that Bombardier just can’t match.

After a run of record years for sales and deliveries, Boeing and Airbus should enjoy a decade of good — if not great — business, Aboulfalia said: “No bust, less boom.”

High fuel prices, and the ready availability of low-interest loans for aircraft mean that airlines have both incentive to acquire fuel-efficient new jets and the cash to do so, he said.

He doesn’t see a bubble forming. “This isn’t housing,” Aboulafia said. “You’ve got mobile assets that are always able to produce revenue for someone.”

Aboulafia also had good news for Puget Sound’s military aircraft builders. “Sequestration” — the deep federal spending cuts set to come on March 1 if Congress can’t agree on a budget deal — isn’t likely to harm Boeing’s KC-46 tanker program, or its P-8 Poseidon sub hunter for the U.S. Navy.

With the tanker, “I think it will be OK,” he said. ” That requirement has been pushed off for ever and ever, and the contract frankly is really beneficial to the Air Force.”

And Boeing has done such a good job with the P-8 program, Aboulafia said he thinks it will be safe. “This thing survives,” he said. “No problem with 108 planes for the Navy, and I’d be very surprised if they don’t get 40 or 50 export (sales) as well.”

For more information about District 751, read the Machinists News.