China Eyes Top of Global Aviation

Add commercial aircraft to the list of industries being transformed by China.

Source: Airbus

The Chinese come to the Paris Air Show as both the world’s largest purchaser of jetliners and a budding manufacturer projected by some to one day challenge the dominance of Boeing and Airbus. Arrival of its much anticipated ARJ21 regional jet is sure to be a topic of interest at the show.

Chinese airlines accounted for about 20 percent of global aircraft deliveries in 2010 and Boeing estimates the country will purchase 4,330 new planes over the next 20 years — one in every seven expected to be produced during the period.

“China has become the biggest in the world and is still growing,’’ says Richard Aboulafia, an aerospace consultant with the Teal Group.

The rise of emerging markets in general and China in particular has kept aircraft makers airborne through a bout of weak demand from Western carriers. In addition to the Chinese, Middle East carriers such as Emirates Airlines and Qatar Airways are ramping up jet purchases, especially for the new generation of widebody models being developed by Airbus, a unit of EADS and Boeing.

Chinese demand is more centered in the narrowbody, single-aisle airline market. To meet a robust rise in domestic air traffic — Chinese traffic has grown at nearly four times the global rate of 4.3 percent since 1990, according to J.P. Morgan and growth is expected to stay close to 8 percent over the next two decades — Chinese airlines are concentrating purchases on the Airbus A320 and Boeing 737.

Paris Air Show 2011 - A CNBC Special Report
Paris Air Show 2011 - A CNBC Special Report

China is also making inroads as a manufacturer. The Commercial Aircraft Corporation of China is developing two models that have already attracted orders from Chinese carriers. The ARJ21 could be delivered as early as the third quarter of this year but will most likely have its first commercial flight in 2012. The larger, narrowbody C919 should be ready by 2016.

“It appears possible, if not probable, that China will become a world producer approximately equal to Boeing and Airbus, at least in the single-aisle sector,’’ wrote Ed Greenslet in a recent edition of trade journal The Airline Monitor.

While built in China, both the ARJ21 and C919 draw heavily on U.S. and international suppliers like GE , United Technologies, Honeywell and Rockwell Collins.

A full one-third of aircraft demand over the next 20 years is expected to come from the Asia Pacific region. After China, India is the dominant buyer in the region.

Source: Airbus

The Indian commercial fleet has more than tripled in the last decade while its order backlog of 280 planes is about half of the giant Chinese market, according to data from Ascend. Indian carrier IndiGo’s intention to order 180 A320s in January was the largest jet agreement in history.

India is projected as the fastest growing domestic market through 2029 with air traffic increasing at a 9 percent annual, according to Airbus’ latest global market forecast.

That type of growth makes the claim of India’s Civil Aviation Secretary Nasim Zaidi that the country will emerge as the third largest aviation market in the world by the end of this decade not that farfetched.