Comac's C919 Supplier Selection Past Due

Chinese commercial aircraft builder Comac aims to complete selection of suppliers for its C919 narrow-body airliner this week, about five months behind schedule. The country’s three biggest airlines will order up to 100 C919s this year, probably at the Zhuhai air show in November, acting as initial customers under state direction. They will not be launch customers, because the project was launched long ago, in May 2008. Indeed, serious marketing of the aircraft to Chinese customers has begun only in the past few weeks. Comac has made initial attempts at getting Western airlines interested in the aircraft, but an industry executive familiar with the effort says success is still remote. A mid-year review of the 12-month joint definition phase is due in late June, just as the supplier selection wraps up. Major components for which suppliers must still be selected include the wheels, brakes, flight-control computer and some avionics. With only days to go before the deadline, it would not be surprising to see the process slip into July. Under the original schedule, the partners were supposed to have been identified by January, says one executive involved in the program, adding that Comac Chairman Zhang Qingwei is annoyed by the slippage. A five-month delay emerging barely two years into the program is hardly encouraging, but industry executives say that apart from supplier selection the schedule is on track. In general, they hold no great fears for the schedule, if only because there is every sign that Comac is the recipient of such massive government support that it will be able to throw huge resources at any problem that arises. It is increasingly clear that the C919 enjoys a status more like that of the Chinese manned space program than that of a commercial industrial project—and that it is being funded accordingly. One executive regards the CFM International Leap-X engine as a more likely source of scheduled risk than the airframe, because the all-new turbofan must be ready for the first flight of the 156-seat C919 in 2014, two years before the delivery dates originally proposed by CFM partners General Electric and Snecma. But two other executives say they are unconcerned about propulsion system delays. They point out that the engine companies cut undisclosed features from the Leap-X design, sacrificing a little fuel efficiency, to meet Comac’s timing. Program personnel stress that after the delays with the Airbus A380 and Boeing 787, Comac could not be greatly faulted for some program slippage. First delivery is due in 2016, eight years after program launch. The ARJ21, which by comparison with the C919 has been developed on a shoestring, is supposed to go into service in 2011 after nine years of development (AW&ST May 24, p. 44). Orders from the big-three—China Southern Airlines, China Eastern Airlines and Air China—will cover fewer than the several hundred units Comac hoped for. The airlines have successfully argued that they should not take on more exposure to a program they regard as risky. Loose contractual terms may also help minimize airline risk, much like those for the ARJ21 program. ARJ21 buyers face little or no penalty for cancellation, while Comac is not strictly bound to deliver on time, say two industry officials. The contracts from the three big airlines should largely fill the C919 orderbook for the first few years of production, which is due to ramp up gradually to a programmed annual rate of 150 aircraft for 12 years. Whether program managers intend to vary that rate with demand, or expect Chinese airlines to keep buying regardless of the ups and downs of the economy, is unclear. The manufacturer hopes to supply 30-40% of Chinese demand for aircraft in its category and 10% internationally. The domestic market target underscores the importance to the Chinese airlines of the C919’s performance. Filling a third of their narrowbody fleets with a particular aircraft type is more than mere tokenism; they can hardly afford to do so if that aircraft is uneconomic, even if the government ensures that they all do so together. In fact, the government is not forcing the C919 on to other Chinese carriers, such as Hainan Airlines and rapidly growing Spring Airlines, which are not controlled by the central government. Instead, Comac is actually marketing the aircraft to them. Although Comac has spoken to airlines in China and abroad over the past two years, the full marketing campaign began with a meeting with airlines in Wushan in the eastern province Fujian last month. Like the initial version of the ARJ21, the C919 will be designed for operation from hot-and-high airfields in western China, says one official. That explains the aircraft’s surprisingly great wing span and thrust requirements, but does not bode well for its efficiency in normal operation, nor for the success of the planned shortened variant (AW&ST Sept. 14, 2009, p. 28, and Sept. 28, 2009, p. 44). The C919 will enter service with technology at least a generation ahead of that in the Boeing 737 and Airbus A320 families, notably, Leap-X. Comac aims to deliver direct operating costs 10% below its two Western competitors’, but will fall short of the efficiency of its competitors’ replacements. To some extent, the C919 may be able to make up for its use of earlier engine technology. Although its version of the Leap-X, Leap-X1C, will lack refinements planned for later versions, CFM will fully integrate the engine with its nacelle, which should improve propulsive efficiency. The planned C919 production rate, equivalent to 12.5 aircraft a month, belies one argument in support of the aircraft’s competitiveness: the suggestion that low Chinese production costs will allow Comac to price it competitively enough against more efficient products from Airbus and Boeing. Those manufacturers are already used to building narrowbodies at three times the rate that Comac is planning. By the 2020s, if the duopoly survives, either or both could be turning out competing aircraft four times as quickly as Comac, with correspondingly low costs. Much will depend on the degree of subsidies. Comac should be able to price the aircraft keenly if it does not need to recover development costs or generate commercial returns on its capital. Funding is lavish. Executives in contact with the program find that Comac, seeking to overcome challenges, often seems to see money as no object. Facilities are massive, training is on a grand scale and salaries are high by Chinese standards. One Western company found that the competitive wages it pays its Chinese engineers are about half of what Comac is paying. Getting foreign airlines to buy an aircraft from an untried manufacturer will be a challenge, but executives suggest Beijing can be expected to apply political pressure on some prospective customers. Also, General Electric Commercial Aviation Services could act as a first foreign buyer, even if it were only a conduit for supplying C919s to Chinese airlines, picking up fees along the way. The lessor has ordered five ARJ21s, for which GE is also an engine supplier.