June 22, 2017 / 6:11 PM / 2 months ago

Beyond air show, newcomers challenge Airbus-Boeing duopoly

Visitors walk past the aircrafts on the static display.Pascal Rossignol

PARIS (Reuters) - This year's Paris Air Show was dominated by the annual order battle between Airbus and Boeing, but industry executives said the duopoly will be forced to share the stage at future shows as newcomers from Russia, China and Japan muscle into the passenger plane market.

Japan's Mitsubishi Aircraft Corp brought its MRJ regional jet to Europe for the first time during the air show. China and Russia carried out maiden flights of new narrow-body aircraft last month in their bids to enter the $100 billion-plus annual aerospace market.

The two countries have also set up a joint venture to build wide-body jets to challenge incumbents.

Consultants Alix Partners estimates that of the current order backlog of around 13,000 planes, about 7-8 percent are for planes from new entrants, among them Russia, China and Japan.

Delegates at the show said mounting a proper challenge will take Russia and China at least a decade. The newcomers face headwinds including proving their technology, and gaining customer confidence by deploying and maintaining a quality aircraft maintenance and support network.

"Overall, there are big steps not only on the product side but on the support and services side for the airlines to feel confident that they can go in and order those aircraft," Pascal Fabre, managing director at Alix Partners in Paris, said.

However, China and Russia are large enough markets that orders from their home countries alone could propel the respective airliner ventures.

Among COMAC's first customers for its C919 was China Eastern, which has ordered up to 20 planes from the Chinese manufacturer, while Aeroflot is due to take the Russian MS21.

COMAC said this week total orders for the C919 stood at 600 from 24 customers.

Giorgio Callegari, strategy and alliances director at Russian carrier Aeroflot, said people he met at the air show showed great interest in the MS21 and the Russian-China wide-body cooperation. Aeroflot is set to lease 50 MS21 planes from state defence conglomerate Rostec.

"If maybe in the past, Russian airplanes were discarded as a non-factor, they are now taken much more seriously and people can see that they are potentially a serious competitor," he told Reuters.

A Boeing 737 Max takes part in a flying display.Pascal Rossignol

The chief executive of Qatar Airways, Akbar Al Baker, said he would not have a problem buying jets from Chinese or Russian manufacturers, provided they met operational and performance requirements.

BATTLE FOR THIRD SPOT

Some executives at the airshow said the marketplace would eventually settle on three major manufacturers and placed their bets on China's COMAC to win that third spot.

"Twenty years from now, I think there'll be the big three manufacturers of Airbus, Boeing and China," said Airbus sales chief John Leahy.

However, Leahy said it would be hard for countries to make billions of dollars of investments over decades to get the product line and support network up to scratch.

Cedric Goubet, vice president of commercial engines at Safran, said he too is betting on the Chinese.

"My feeling is that it will be the Chinese. They have the resources, the skills, the national ambitions and a huge domestic market," he said, while adding that it was also crucial to get export orders.

Dang Thiehong, deputy head of marketing at China's COMAC, told Reuters the aircraft market was big enough to share. "We hope to provide our services and products to the market no matter in which part of the world," he said.

China is crucial to the growth prospects of all the major airliner manufacturers.

Randy Tinseth, vice president of marketing and sales at Boeing's commercial aircraft division, cautioned against the dangers of underestimating new rivals, "Never sell your competition short."

Japan's Mitsubishi has set its sights on the regional jet market instead of going head to head with the larger planes sold by Airbus and Boeing or rising Chinese and Russian rivals.

Yugo Fukuhara, vice president sales and marketing at Mitsubishi, told Reuters, "Our vision of this business is to become one of two major regional plane makers. We don't compete with China and Russia."

Additional reporting by Tim Hepher, Andrea Shalal, Giulia Segreti, Cyril Altmeyer, Mike Stone; Editing by Adrian Croft

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