PILARSKI SAYS… Newcomers fail to dent duopoly
Newcomers fail to dent duopoly
New aircraft manufacturers are finding it difficult to move the top two from their leading positions, writes Adam Pilarski, Senior Vice President at Avitas.
As featured in Airfinance Journal Column PILARSKI SAYS
Some time ago the Japanese decided to manufacture cars. The initial products were cheap and of very low quality. But now their cars epitomize quality and even luxury; indeed, all of my driving-age children drive Japanese cars. The same type of transformation has happened in many industries in which Chinese, Indian and other nationalities dominate what used to be the sole domain of American and European companies. This includes some very high-tech fields such as supercomputers and medical research. As a matter of fact, as of this year a Chinese supercomputer is the world’s fastest, having double the speed of the previous champion, the American 2012 Cray. Some time ago, again, the Soviet Union put the first person in space, which showed that the West did not have exclusivity on advanced technology. Aviation has undergone tremendous changes over many decades. Some iconic names no longer exist, including Fokker, Dornier, Douglas and McDonnell. Who could have predicted that, the conventional wisdom goes, hence who is to say that totally new players will not emerge in the future. Why should we not assume that the aviation landscape would change dramatically, at least to the same degree that it has changed in the past few decades? This is especially in light of the fact that economic power is shifting away from Europe and the US, which have dominated aviation from the beginning of time. If newcomers can be successful in sophisticated fields such as supercomputers why should they not be capable of becoming the lead force in aircraft manufacturing, the thinking goes. Of course, there are those analysts who point out with glee the numerous false starts of many new aircraft manufacturers, and insist that the Europe/US duopoly will, for all practical purposes, remain for a very long time. A number of countries have entered the commercial jet market, starting with smaller jets but expressing interest in eventually expanding into all segments of the market. Such developments have been successful in Brazil, Canada, China, Russia, Japan and a few other countries. Recent developments, though, have cast doubt on the rapid, future erosion of Airbus and Boeing’s leading positions in aircraft manufacturing. Teething pains of the Mitsubishi MRJ aircraft have been evident with the recent postponement of the first flight, and a less capable aircraft than initially advertized. The Chinese recently announced a delay in their entrance into the heart of the narrowbody market – the 919 – that will also be less impressive than initially promised. The Chinese entry into the regional jet market – the ARJ21 – has been a monumental disaster. This regional jet started life 11 years ago as a simple project with no real chance of international success but was seen as easy testing material for the Chinese industry. The aircraft is still in certification mode, and it is doubtful much was learned. Rather, it proved that the Chinese are further behind than they believed they were. The 919 programme is being simplified and, again, being used to get things right so that the next project will be an international success. How long can this go on? Will the Chinese throw in the towel? The Russian entry into the regional market, the Sukhoi jet, had its share of delays and problems. The Canadian CSeries has had delays – although it flew recently – and the delays were not too different to those experienced by the top two manufacturers (see the 787 and the A380). So why has the progress to break the Boeing/Airbus duopoly been so slow or even non-existent? If newcomers could be wildly successful in technologically sophisticated fields such as supercomputers or medicine how come they repeatedly fail in entering the large jet market successfully? It appears that our industry is truly different from others. It involves complex systems in manufacturing but also is as important in product support. Newcomers can overcome the technological barriers to generate very fancy products, but they have a hard time with the more mundane and less exciting tasks of being certain that the boring certification is done properly, that all parts are installed correctly and that the aircraft gets the support airlines are used to. The outcome is that new players will, as predicted, get an ever-increasing share of the market, but that this evolution will be much slower than many expect.