Another Revolution in China: Starring Airbus and Boeing?
Monday, December 5th, 2005
The aerospace industry finally has some good news, and it’s the strides Airbus and Boeing are making in China. With big ($9 billion big) deals, the companies look good, but the deals are also raising questions about the future of aviation.
Airbus also struck a deal to supply 20 planes to a Chinese upstart. Three of the planes will be delivered by May 2006, when East Star Airlines will begin operations out of its home in central Wuhan. The deal counters rival Boeing’s success in tapping the Chinese market, which, Boeing says, will need 2,600 aircraft by 2025.
As Airbus and Boeing continue to spar, we look forward to the day when innovation will replace business wrangling in the aerospace sector. Instead of government subsidies or rights to contracts in China, the companies should be developing products that benefit airlines and passengers. Airbus should continue its work on the surprisingly–we’re told–comfortable and eco-friendly A380 super-jet. Boeing should pursue the speedy, fuel efficient, and passenger pleasing Dreamliner series. And both companies, rather than bickering with trade regulators, should consider what they can do to stop the growth of Bombardier and Embraer, two companies banking on a further increase in the point-to-point aviation model using regional jets.
We recently flew from St. Louis to Newark on an Embraer 145 in under two-and-a-half hours. Skipping a layover in, say, Chicago, Pittsburgh, Charlotte, or Atlanta, we sped along at over 30,000 feet, heading exactly where we needed to be. To call the new, Brazilian jets “regional” doesn’t describe how useful they are. Even Airbus-friendly Jetblue decided to add a set of Embraers to its fleet, citing passenger demand on certain routes. With less-than-full planes, Jetblue was–as they themselves say–flying TVs around the country. Razor-thin profit margins on low-cost carriers demand the kind of 70-110-seat flights Embraer can provide: it’s easier to fill 100 seats than 150.
Will the deals Boeing and Airbus make in China give them the capital to continue innovating? That depends on how popular flights out of Wuhan prove to be.
Paul