Recently Boeing's (BA) reported earnings that smashed expectations and its guidance came in far higher than consensus.Boeing share price then soared taking out its all-time high as annual sales topped $100 billion for the first time in its 102-year history. Many analysts claimed the American airplane maker was set for even more gains in 2019 after bouncing back from production snarls with its 737 jetliners but with their airplanes falling from the sky everything rapidly changed.

The sales of jetliners are very important because they play into the bigger picture of world trade and trade imbalances and China is a massive battleground for Boeing and Airbus (EADSY) because of the sheer size of their market. China's air travel market is expected to surpass the United States by 2024, according to the International Air Transport Association which estimates that 927 million people will travel to or from China by air in 2025. This compares to the 904 million passengers to and from the United States. Translate that into actual orders, and you’re looking at something on the order of 2,800 new planes with a book value of $329 billion. Boeing has projected it could sell China 6,330 planes worth $950 billion during the next 20 years. Nearly three-quarters of the planes for its civilian airlines will be single-aisle with about 700 wide-bodies. Boeing wants to sell China as many of those airplanes as it can and beat out its arch-rival, Airbus. 

Unfortunately, Airbus won't be the only rival Boeing has to contend with because China is rapidly pushing its own aviation sector forward. The C919, being built by Chinese state-owned aviation manufacturer Commercial Aircraft Corp of China (COMAC), is a perfect example of Chinese intentions and should send fear into the hearts of Americans. COMAC has spent 11 years and $6.5 billion developing the C919, which is seen as China's answer to the Boeing 737 and Airbus 320.The C-919 has a flight range of up to 3,451 miles (5,555 kilometers), which means it can fly non-stop from Shanghai to Jakarta or from Paris to Montreal and it can fit 158 to 168 seats. This hits right at the heart of its competitors, different models of Boeing 737 can seat 85 to 215 passengers; while an A320 can accommodate 100 to 240 people.

Expect China To Rapidly Ramp Up Production

Politics plays a big role in industry and the Chinese government which has long aspired to play the "plane game" has no qualms admitting its big role in developing the country’s aviation industry. Miao Wei, vice minister of industry and information technology, has been quoted saying the government encourages the development of export-oriented aviation products. Articles that have appeared on this site over the years argue that China is not our friend and that we had better be on our toes. Several of these articles explored how China was ramping up its fledgling aviation industry and how when it hits its stride we can expect cutthroat competition. The article warns that as China's aviation industry takes flight over the next decade America and Boeing may be saying say goodbye to a big chunk of its exports in this field.

An article in USA Today in the fall of 2009 focused on the planned C919, called the "big plane" project, designed to directly challenge U.S. plane-making giant Boeing and European rival Airbus. The article reported the first flight wasn't scheduled until 2014, and the jet wouldn't be available commercially until 2016. But even back then the Chinese manufacturer claimed the twin-engine, narrow-body design of the C919 is superior to its competition the Boeing 737, the best-selling jetliner in the world, and its competitor, the Airbus A320. COMAC is yet to release the price tag of the jet, but a report by China National Radio predicted that it would likely to be sold for around $43 million. This is much cheaper than a Boeing 737 or an Airbus 320 which each cost around $80 million $100 million respectively.

At the end of 2018, the third C919 completed its maiden flight at the Shanghai Pudong International Airport. Footage of the flight released by Chinese state broadcaster China Central Television Station. COMAC said the plane completed 21 test points during the flight but did not reveal more details of the maiden flight, such as the plane's altitude or speed but in May of 2018, the first C919 during its maiden flight reached 10,000 feet with a maximum speed of 170 knots or 196 miles per hour. The first two C919s took to the skies just last year and are undergoing flight tests in order to obtain flying certification. Three other C919s are currently being assembled and are expected to complete their first flights next year.

The Chief Designer of the ARJ21, Wu Guanghui, says that COMAC has turned to new, lightweight carbon composites in place of steel for the plane's construction to gain the 12% to 15% in fuel efficiency. Boeing, which is the pioneer in composite design, has had difficulty in bringing its first composite plane, the 787 Dreamliner, to market, however, once a company pioneers the way we find those following in their footsteps have an easier path. Boeing and Airbus have delayed plans to build more fuel-efficient, narrow-body planes to replace the 737 and A320 because it cost billions to create a new plane and adding composites won't contribute enough fuel-efficiency savings to justify the move. Price isn't the sole factor for airlines in buying a plane, overall quality, reliability, maintenance, and readily available replacement parts, as well as the pilot and mechanic training that manufacturers provide, are also important.

Building commercial aircraft has never been a consistently profitable business, manufactures risk several billions of dollars every time they try to develop a new type of aircraft. The Communist government, however, is playing by a different set of economic rules and using the C919 as a springboard to develop a nationwide aviation industry involving more than 200 companies, 36 universities and hundreds of thousands of personnel. Some free trade optimist claim China's airline industry has become a private-sector industry and ignore the government's influence saying, just because the C919 will be made in China doesn't mean all the Chinese carriers will stop buying 737s and A320s to buy only C919s. They also claim it will be decades before the Chinese will be able to produce anything close to the numbers of planes that the Chinese market will demand.

This is not China's first jet, at the end of 2015, COMAC delivered its first new "Advanced Regional Jet for the 21st Century," dubbed ARJ21. The buyer, Chengdu Airlines contracted to buy 30 of these new planes and across China, more than 300 orders from various airlines and airplane-leasing firms have been placed. The ARJ21 is tailor-made for the Chinese regional market, it is capable of carrying as many as 90 passengers on trips as far as 1,300 miles allowing it to make direct flights to just about any point in the country. Currently the plane is built with about 50% U.S.supplied parts, including avionics from the well-respected Rockwell Collins and engines from General Electric. The ARJ21 is the result of a trade delegation led by President Obama back in 2009. This does not impact Boeing which doesn't play in the 90 passengers and below market but it directly competes with models from Brazil’s Embraer and Canada’s Bombardier.

So where is this going? China is investing big in this vision with its State media touting the "advanced technologies" that will be used throughout the plane, from new avionics to the plane's frame partially made of light composite materials. COMAC is also developing a wide-body plane, the C929, in cooperation with Russia's United Aircraft Corp. Another company, Avic, is currently working on China’s first helicopter factory. The bottom-line is that it would be incredibly naive to underestimate China's resolve in rapidly becoming a player in a field that will move it up the manufacturing food chain. Expect competition in this field to rapidly intensify as new Russian and Brazilian jets also hit the market.

With China's experience of building cities from scratch and government-backed financing, why build just one factory when you can build twenty? This means we should not expect China's aviation industry to grow organically but to be engineered by an aggressive government with a mission. All this is part of a plan to take China a huge step closer to its trillion-dollar aviation dream of replacing all 6,000 to 6,800 of its western aircraft will its own planes. This translates into a cost of around $1 trillion dollars, with most of the replacements expected to be this single-aisle made-in-China jet. This makes China's C919 a big deal.

Now Airborne China's C919 Will Be A Major Player