Yesterday, the long-awaited maiden flight of Bombardier’s CSeries aircraft took place.
Coming after years of delays, the Canadian aerospace company’s CSeries will jostle for a spot in a crowding market for small-capacity, single-aisle planes.
While the narrow-body aircraft goes through its paces for its scheduled delivery in 2017, rivals such as Japan’s Mitsubishi Heavy Industries with its Mitsubishi Regional Jet, Commercial Aircraft Corporation of China and Empresa Brasileira de Aeronautica (Embraer) are not far behind.
Further, the Superjet 100 made by a joint venture between Russia’s Sukhoi and Italy’s Finmeccanica is up and running. The plane, however, has been beset by problems.
It is estimated that demand for single-aisle aircraft in the 70 to 100-seat capacity will reach 5,000 over the next 17 years to 2030.
Much of that demand is expected to come from China and Russia and, of course, Europe and the United States, where ageing aircraft need to be replaced.
While the top end of the market for large-capacity planes is dominated by Airbus and Boeing, the two companies have been happy to cede the market in the low-capacity segment to Embraer and others.
“The small jetliner market offers a unique combination of minimal growth and negligible profit,” says Richard Aboulafia, vice president of analysis at Teal Group. “For Airbus and Boeing, their experience in this segment was nothing short of disastrous, and they’ll likely never go near it again.”
Saj Ahmad, the chief analyst at StrategicAero Research.com, concurs. “To be brutally honest, not a single one of these competitors has what it takes to become threats to Airbus and Boeing.”
“Indeed, they may be a threat to one another at the smaller end of the market where Airbus and Boeing do not have a presence, but even then, the battleground here is so cut-throat, with low-yield profits on capability-restricted airplanes, you understand why Airbus and Boeing rightfully ignore this segment with no direct competition of their own. It’s a waste of time, money and resources for not a fat lot of market share or profitability,” says Mr Ahmad.
And yet, the 140 to 180-seat segment that Bombardier’s CSeries and Comac’s C919 are trying to tap puts the planes in direct competition with Airbus and Boeing, who have hit back with fuel-efficient versions of their best-selling A320neo and 737Max. Together the two have racked up of sales of more than 3,100 aircraft, with deliveries expected to begin in 2015 for the A320neo and 2017 for the 737 Max.
Brazil’s Embraer is a serious contender as its E-Jets have proved popular. The company’s hardware is used by nearly 100 airlines across the world. Given the threat posed by the CSeries, it launched the second generation of E-Jets at the Paris Air Show with the different variants – E175-E2, E190-E2, and E195-E2 – expected to enter service between 2018 and 2020. Customers have already placed 215 orders, one more than the 214 firm orders and commitments for the CSeries, which has had a four-year head start. The bulk of Embraer’s orders have come from SkyWest Airlines of the US and the leasing company ILFC.
“Given Embraer’s dominance of this segment, everyone else would be wise to keep their expectations low,” says Mr Aboulafia.
In Russia, where air traffic is forecast to grow at 4.4 per cent a year, aviation prospects are bright. The country and the rest of the former Soviet states require about 1,200 aircraft, valued at more than US$140 billion, over the next 20 years, according to Boeing estimates.
Airbus’s forecasts for 2012 through 2031 show Russia taking sixth place globally in terms of new passenger aircraft demand.
Even the Russian president Vladimir Putin has thrown his weight behind the country’s aerospace sector, which has ambitions to sell billions of dollars worth of aircraft by 2025.
“Three of the largest replacement markets in the world are the US, Europe and Russia, where many older airplanes need to be phased out and more efficient airplanes brought in,” Mike Barnett, the managing director of marketing at Boeing Commercial Airplanes, said last month.
In the early 1990s, airplanes built by western companies accounted for less than 2 per cent of the fleet in the former Soviet states, which operated the unreliable Tupolev and Antonov aircraft. Now, 70 per cent of the planes in use are western-built.
Even as foreign plane makers compete for a slice of the market, the home-grown Sukhoi Superjet 100 aims to take on competing models from Embraer and Bombardier.
But the aircraft programme has run into difficulties. One of its planes crashed in Indonesia last year, killing 45 people. In June, another jet was involved in a wheels-up landing at Reykjavik airport in Iceland when it was undergoing testing.
Although the Sukhoi’s order books are not comparable with its rivals, it has managed to firm up a booking for 20 aircraft from Ilyushin Finance, which was first announced at the Paris Air Show in June. Deliveries are to start at the end of 2015.
Russia’s other home-grown champion is United Aircraft, which is readying the Irkut MC-21. The $8bn project is working to get the 150-200 seater up in the air between 2015 and 2016 and introduce it into service by 2017. The aircraft clocked up a few notable orders from IFC, Transero and Sberbank during the recently concluded Maks air show in Moscow.
While Russian companies get their act together, Bombardier plans to service the gap with products from its portfolio, including the CSeries. “It is ... a market place where they have an ageing fleet and a couple of our products fit in the specific niches where the Russian aviation industry isn’t focusing,” Rod Sheridan, a vice president of sales and asset management at Bombardier Commercial Aircraft, told Reuters.
“There are some good products that Russia has developed and is developing, but to ramp up and answer the replacement [demand] is going to take some time,” Mr Sheridan added.
South of the border, China, too, will require large numbers of aeroplanes. Boeing’s forecast for the next 20 years shows that the country will require 3,900 new airplanes, with single-aisle planes accounting for 70 per cent of new deliveries. In 2012, domestic traffic accounted for 78 per cent of the total travel and the segment is expected to grow at 6.8 per cent.
Given the scope for growth, China hopes to tap the demand with its Comac C919 aircraft, which has a capacity of 158 seats. Like most new aircraft programmes, the C919 has had its share of troubles. Initially scheduled to go into service in 2016, the airline’s first flight was recently postponed from June next year to the second quarter of 2015. This means delivery, too, will be delayed to 2017.
The troubles of new entrants are not specific to them alone. Even Airbus and Boeing have had problems with the A380 superjumbo and the Dreamliner to the market, facing years of delays and cost overruns.
“These smaller players would have been far better off collaborating, not competing with Airbus and Boeing. As it is, all they are doing is consuming efforts and resources on vanity projects that will only be remembered for their stunning waste and failure. Lessons being adhered to in the aerospace arena is a fad – if lessons really were learnt, by anyone, then the A380, 787, A350, CSeries, MRJ, MS-21, ARJ-21 and other jets would never have been delayed,” says Mr Ahmed.
“This industry favours size and critical mass, another factor that works against newcomers,” says Mr Aboulafia. “Bombardier has been around for many decades, and is merely attempting to move up, towards Airbus and Boeing. They appear to be faltering in this effort, but they still have hope.
“Russia is trying to get back to a mere fraction of where they were 25 years ago, with minimal results. Mitsubishi’s regional jet efforts represent a small fraction of what Japan is going elsewhere in aerospace. As for China, there’s great potential, but a very limited strategy, with results so far that have been regrettable, at best.”
The newcomers are attempting to reinvent the wheel. That is never wise.