BEIJING (Reuters) - When China set a goal to leap from being a tiny aerospace-industry player to a direct threat to Airbus and Boeing, few scoffed at the idea, given Beijing’s track record of using deep government pockets to push state-owned firms up the ladder.
But as leaders of the global aerospace industry gather in Beijing for an International Air Transport Association meeting that kicks off on Sunday, a closer examination by Reuters shows that the potential challenge from China might be greatly overblown, and that its aircraft sector is unlikely to pose any credible competition for at least a decade.
To start with, a host of design flaws have delayed approval by the Civil Aviation Administration of China for the country’s first homegrown passenger jet -- a 90-seat ARJ21 “regional” plane.
That in turn is likely to set back the country’s bigger ambition, to dent Airbus EAD.PA and Boeing’s (BA.N) global stronghold with a 737-sized airplane of its own.
In interviews with executives from three different technology suppliers working with Commercial Aircraft Corp of China (Comac) CMAFC.UL to develop passenger jets, Reuters has learned that various tests over the past two years have identified flaws in the ARJ21’s wings, wiring and computer systems.
During a stress test in mid-2010, the wings of the ARJ21 broke, or “cracked” in one executive’s description, before the pressure applied reached regulatory norms.
In further examinations conducted last year, the avionics system -- the brain of the plane -- failed at times to work properly, highlighting what one of the three suppliers executives described as a “system integration problem.” Faults in the wiring were also discovered in those tests, according to the supplier executives.
The results of the tests have been rumoured among industry insiders, but the Shanghai-based aircraft maker has never spoken publicly about them.
“You should have seen the faces (of Comac engineers and executives)” said one of the three suppliers, who was at the 2010 test in a lab in the central Chinese city of Xi‘an, speaking on condition of anonymity. “There was uncomfortable silence in the room.”
Comac declined to comment on the matters raised in this report. But it said one version of the plane - the ARJ21-700 - completed a nearly two-hour test flight in February this year.
China’s civil aviation regulator could not be reached for comment.
The ARJ21’s troubles are more than a blow to Chinese pride. They highlight the country’s struggle to become a producer of high-tech items from bullet trains to large commercial jetliners.
Indeed, recent experience shows that money does not guarantee success in high-tech industries. A rail accident in July 2011 killed 40 people, undermining China’s portrayal of the rapid expansion of its high-speed railway network as a sign of its growing technological might.
A Comac official said last month the ARJ21, which is central to Beijing’s aerospace push, was unlikely to win regulatory approval before 2013, putting the project about five years behind its original schedule, without offering a reason.
The delays and difficulties are likely to set back Comac’s larger ambition - to start delivering the 160-seat C919 jetliner by 2016, a timetable that would have put it on track by the second half of the decade to challenge Airbus EAD.PA and Boeing’s (BA.N) dominance of the global market for large passenger aircraft.
“There is the very serious risk that by the time the C919 enters service (we think three years late is a good estimate), Airbus and Boeing are offering products that make this jet look obsolete,” wrote Richard Aboulafia of U.S.-based consulting firm Teal Group Corp. in a research report.
“It would be wrong to dismiss a threat from any competitor, but it may have been wildly overblown” in the case of Comac, said a senior Boeing executive, who spoke on condition of anonymity.
Comac has never publicly explained the project’s delays.
The firm’s chief financial officer Tian Min told Reuters last month the company was still on track to gain certification for the C919 by 2016, as originally scheduled. He did not elaborate.
Securing regulatory approval for the C919 by 2016 would, in theory, give Comac a jump of about half a decade over Airbus and Boeing, which do not plan to launch completely redesigned A320 and B737 planes respectively until around 2020.
But the ARJ21’s delay could squander that time advantage, since the effort to fix its problems would hinder the ability to design the C919 on schedule.
Also, the U.S. Federal Aviation Administration says it would not consider accepting China’s certification for the C919 until it completes a technical pilot assessment of the capability of its Chinese counterpart to certify the ARJ21 to FAA’s airworthiness requirements.
FAA certification, which is recognised globally, is critical if the C919 is to succeed in the international market.
Rivals did not want to comment officially on Comac’s problems.
Boeing does not “focus on others’ issues but focuses on our customers, on our current products and on future product development,” said Wang Yukui, a Beijing-based spokesman for Boeing.
Airbus said in a statement that “China has the resources and the ambition to design and build the C919 but must also demonstrate better performance, reliability, infrastructure, services and trust to match the well-established A320.”
Most aerospace insiders already dismiss the ARJ21’s threat to established global commercial jetliner producers. In the absence of cutting-edge equipment and systems built outside China that Comac failed to procure, “it has turned into an overweight and stunningly obsolete product that has no relevance outside of China’s tiny regional airline sector,” Teal Group’s Aboulafia said in his research notes.
“The Chinese would like to remove it from the picture but they can’t because it might be needed to help certify the C919,” Aboulafia told Reuters.
Still, Airbus and Boeing have no choice but to take Comac seriously. China is one of the world’s biggest markets for passenger jets, with demand estimated by Boeing to be around $480 billion over the next two decades.
The Western planemakers fear China’s state-controlled airlines might be compelled to buy Comac aircraft rather than their own planes.
The senior Boeing official who spoke on condition of anonymity said the C919 “could still be a threat to Boeing and Airbus, if they are patient and design the airplane right and get it approved eventually.”
Several suppliers in the U.S. and elsewhere are working on the C919 to help Comac come up with a competitive large jetliner. Those include CFM International Inc., a joint venture between GE (GE.N) and France’s Snecma (SAF.PA) which won a $10 billion contract to make the Chinese plane’s engines, as well as Rockwell Collins (COL.N), Eaton Corp. (ETN.N) and Honeywell (HON.N).
One executive with a technology supplier said that in his experience in working with aircraft producers, the kind of delays Comac is now experiencing may be normal.
“You have to remember,” he said, “Comac is building airplanes that they’ve never built before.”
Reporting by Beijing newsroom; Additional reporting by Fang Yan; Editing by Ken Wills and Raju Gopalakrishnan