Boeing's Chinese Challenge

"State-owned Aviation Industry Corp. of China ... unveiled ... its design for a single-aisle commercial jet to break the Airbus and Boeing (NYSE: BA  ) duopoly in the production of large aircraft."

That was MarketWatch's breathless recap of yesterday's news from Beijing. Yes, AVIC has an airliner in the works. And with a planned capacity of 190 passengers, the new C919 aims at Boeing's position in the large airliner market. (As opposed to, for example, China's ARJ-21 regional liner, which targets smaller jet makers like General Dynamics (NYSE: GD  ) , Textron (NYSE: TXT  ) , Embraer (NYSE: ERJ  ) , and Bombardier.) But while pundits have the bare facts right, they're jumping at shadows when predicting the end of the "Airbus and Boeing duopoly."

You must chill
Yeah, I know China's going to change the world. But when you get right down to it, this news isn't as big as it sounds. I mean, you don't see Embraer and Bombardier quivering in their aviator's jackets over the threat from China. Or the one from Japan. Nor do they fear Russia's "Superjet."

Similarly, I suspect the C919's advent will prove a tempest in a Chinese teacup. For one thing, the plane remains seven years from its supposed first delivery date. For another, Boeing itself has provided numerous object lessons in the malleability of deadlines. For a third ... even once it's built, the C919 may only sell well within China.

Scare globally, sell locally
That is, after all, the way things have worked with past challenges to the Boeing/Airbus hegemony. Pundits all aflutter with the Chinese news may have missed the fact that the "duopoly" has had a superpower rival for decades, in the form of Russia's aircraft industry.

Nor are the Russians bad planemakers. I've flown in the Tu-214, and prefer it to almost anything manufactured by Boeing or Airbus -- but I'm not holding my breath waiting to see Delta (NYSE: DAL  ) add Tupolevs to its fleet. The air traveling public here just wouldn't stand for it. And if Russia's got a bad rep for quality, just imagine what China has to overcome.

Foolish takeaway
When you get right down to it, I see no threat in the C919. To the contrary, I see opportunity here. Just as China's ARJ requires the help of General Electric (NYSE: GE  ) and Honeywell (NYSE: HON  ) to get it airborne, so too do I expect the C919 will require Western assistance -- and pay through the nose for it. Long story short, China's new plane isn't the bad news for Boeing many are predicting.

But it's good news for just about everybody else.

Disagree? Feel free. If you think China's got a real bead on Boeing, tell us why below.

Fool contributor Rich Smith owns shares of Boeing. Embraer is a Motley Fool Stock Advisor recommendation. General Dynamics is a Motley Fool Inside Value pick. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 09, 2009, at 11:59 AM, TMFKris wrote:

    I've always found a disconnect between Russia having a "bad rep for quality" and yet contributing to building the International Space Station.

    -- Kris (Motley Fool copyeditor)

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 980588, ~/Articles/ArticleHandler.aspx, 12/21/2014 6:58:51 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement