How China Could Challenge the Boeing-Airbus Duopoly
Investors overestimated the competitive chances of Bombardier and Embraer, but now risk underestimating the threat posed by China
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January 6, 2019 - by By Jon Sindreu for The Wall Street Journal
China may be knocking on their gates sooner than they expect
Boeing and Airbus are very close to neutralizing all threats to their duopoly—with one exception. In time, a Chinese challenger could have the scale necessary to compete in the $190 billion commercial aviation market.
Boeing is in talks to buy an 80% stake in the commercial aircraft division of Brazilian manufacturer Embraer for $4.2 billion. Terms were approved last month...
Boeing's interest in Embraer is a response to Airbus' purchase of the 108-to-133 seater CSeries—renamed A220—from Canadian manufacturer Bombardier. If completed, the latest deal would take out the industry's last small player.
China's pockets are large, too. A conservative estimate for public money spent on the C919 is above $7 billion, according to U.S. think tank Rand Corp. That's more than the CSeries cost to develop, and on par with the A320 once adjusted for inflation. Unlike Bombardier, Comac has a huge domestic market—the C919 already has about 1,000 orders from Chinese airlines—and could easily expand across Asia, Russia and Africa.
Boeing and Airbus have made the right moves. But competition from China may be knocking on their gates sooner than they expect.