‘Prisoner's dilemma': How China is using the West to break an aviation duopoly

Sydney Morning Herald

4 hours ago

For example, China's strategy has been to require Western companies to set up co-production facilities within China, where technical knowledge can either be shared or acquired legally or illegally.
Airbus, active in China since 1994, operates a final assembly line facility in Tianjin, as well as an R&D Centre and Airbus China Innovation Centre. It will soon open a second assembly line in Tianjin.
'All Airbus sites around the world have robust systems in place to protect intellectual property rights and data,' a company spokesman said.
Should COMAC eventually succeed in producing cheaper, competitive jets at scale, the competitive landscape for Boeing and Airbus will change dramatically.
'Airbus welcomes competition, and the entry of COMAC in the market will not affect our commitment to continue working with our customers, partners and suppliers in China,' the company said.
The people who are most willing to talk about China's aggressive technology acquisition are not COMAC or Boeing, but the people concerned about the relative power of democracies in the face of China.
Emily de La Bruyère, a senior fellow at the US-based Foundation for Defence of Democracies, believes Western aerospace companies are mistaken for partnering with China in their commercial aerospace programs.
They are 'incredibly short-termist and blind for ignoring the consequences of their action', de La Bruyère told this masthead.
(Airbus rejects the claim of being 'short-term' focused, pointing to its history in China dating back to 1994.)
De La Bruyère believes Western aerospace companies face a 'prisoner's dilemma' in China.
If any single aerospace company pulls out of China over intellectual property theft fears, they will get punished financially, she says. But their individual action won't stop the larger trend of China's forced technology transfers, industrial espionage and hacking.
So the Western companies are 'sowing the seeds of China destroying their [the companies'] markets all over the world for the sake of what is a very short window of access to the Chinese market'.
Engine-makers GE Aerospace and Safran were contacted for comment.
A market looms
Although the price of the C919 has reportedly come in higher than expected, expectations are that if it can be built at enough scale, it would eventually undercut the price of giants Airbus and Boeing.
As Michael O'Leary, chief executive of the ultra-low cost Irish carrier Ryanair, put it recently: 'The Chinese are basically building a f---ing A320. So if it was cheap enough – 10 or 20 per cent cheaper than an Airbus aircraft – then we'd order it,' he told aviation publication Skift in May.
To eventually establish a large position in the market, COMAC must have a customer base. COMAC has successfully sold a smaller, 80-seat regional jet, the C909, to airlines in South-East Asia: Lao Airline, VietJet, TransNusa (of Indonesia) and soon GallopAir of Brunei.
Alton Aviation Consultancy's Beijing-based Jiang Shuai notes: 'If C919 can be successfully operated in Asia, the track record will support COMAC's C919 future sales outside of Asia.'
Focus on Asia
As for the continued technological development of COMAC's aircraft, China's experience in other industries is instructive.
When Western bans on telco equipment-maker Huawei hobbled its exports into developed markets in 2018, the company pivoted to the Global South, where governments were less fussed by the prospect of security concerns.
CSIS's Kennedy notes that regulators in most of the world still only consider purchasing aircraft certified by the FAA or the EASA.
As for the Huawei example, 'there is no comparable Western-based regulator of telecom equipment'.
'Neither [the FAA nor EASA] has certified or is likely to certify the C919 any time soon because of concerns over safety,' Kennedy says.
Yet demand for new jets is real.
After years of supply disruptions, difficulty in sourcing parts, and the impact of COVID, the backlog to be delivered to airlines exceeds 17,000 planes, says the International Air Transport Association.
Boeing is still contending with the aftermath of two 737 Max jetliner crashes that killed 346 people, blamed on the botched rollout of a software system. Production restrictions have slowed Boeing's all-important 737 further.
Alton Aviation's Shuai says: 'Given Boeing's and Airbus' supply chain issues and delayed deliveries, we expect Chinese airlines to continue to demand and take deliveries of C909 and C919 aircraft.
'Domestic demand is sufficient to fill COMAC's production rates for the next few years.'
Efficiency matters
The economics of aviation are not just the upfront costs of planes. Earnings in commercial aviation are underpinned by ever more inexpensive planes to operate in fleets. Each new plane model must be a full 20-30 per cent more efficient than the last to stay profitable over its lifetime.
If COMAC produces a structurally less efficient and more costly plane, it will saddle buyers with more expenses, making the plane less competitive. Yet China is determined to achieve what Aboulafia refers to as 'autonomous (or autarkic) aviation power', autarky being complete economic self-sufficiency.
Aboulafia has testified that China hopes to introduce a fully Chinese version of the C919, which includes the hardest part, 'all-Chinese engines', around 2035.
With this trajectory, China will be closer to its goal, aided deeply by Western aerospace companies, says Foundation for Defence of Democracy's de La Bruyère.
'Early on, maybe it was harder to see a future in which China would be able to develop real, competitive technology in the field,' she said, so the logic of engaging in China 'maybe made a little more sense'.
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'But the fact that the partnerships continue despite China's proven and advancing capabilities, proven intention to disrupt the incumbents and methods of doing all that, is fundamentally destructive for them.'
Asked what's wrong with China succeeding in the commercial aerospace, de La Bruyère said Western businesses fundamentally misunderstand the concept of success to the Chinese Communist Party.
'The CCP has a different vision for what industrial and technological success means.
'It's not profit, it's control.'