China is building the Comac ARJ-21, and trying to finish the Comac C919. These planes likely have bad economics, in terms of the total package of purchase cost and operating costs (Note that very few airlines outside of China will order them. Note the non-advanced technologies involved. ) Most people believe the orders these planes have received were commanded by the Chinese central government.

How takes the economic loss? Is Comac selling them for way under cost? Are the airlines expected to pay the extra costs themselves? Is there some sort of government subsidy? Somebody must be paying.

firstly, we have to accept the fact that Comac can to some extent, build a complex product at a lower cost than the western duopoly. Not by a gigantic margin, but its something. They do have lower labor, overhead and probably regulatory costs.

Of course, there will be orders placed by domestic carriers that are influenced/incentivised/persuaded by the Central Govt. Maybe all.

Who takes the loss? Well, call it a loss if you will, I think most in the PRC would call it an investment - and frankly, they are right.
Fault the PRC all you want, but they have shown the willingness and ability to bootstrap themselves from Medieval to space age when they put their minds to it. They have put a high priority on becoming self-sufficient in many ways, and this included heavy industry/high tech. They will get there, and Comac and domestic carriers are part of it.

In the end, it will be indirect govt funds and direct consumer costs that will build a viable domestic aircraft industry. Frankly, not that different from how the industries were developed in the US/Europe (nit-picking not necessary, please)
This isn't like the Soviet era bureaus and builders - the Chinese understand capitalism and market forces very well. They know what they have to do, and its one step at a time. Check back in 40 years; on second thought - 20 years.

kitplane01 wrote:

These planes likely have bad economics, in terms of the total package of purchase cost and operating costs

Could you please quantify these "likely bad economics"? How bad are you suggesting they will be. Is there any evidence to back this up?

kitplane01 wrote:

Note that very few airlines outside of China will order them. Note the non-advanced technologies involved.

That's quite a cut and dried comment. How are you so certain? For not having as advanced technology, the 737 held its own against the A320 for at least a couple of decades from the late 1980s, so advanced technology isn't necessarily the be all and end all.

kitplane01 wrote:

Most people believe the orders these planes have received were commanded by the Chinese central government.

Do they?

kitplane01 wrote:

How takes the economic loss? Is Comac selling them for way under cost? Are the airlines expected to pay the extra costs themselves? Is there some sort of government subsidy? Somebody must be paying.

You've told this story of a big economic loss and then are suggesting someone must be paying for it - it may be worth quantifying this big economic loss first so that then there can be a reasonable discussion.

V/F

VirginFlyer wrote:

kitplane01 wrote:

These planes likely have bad economics, in terms of the total package of purchase cost and operating costs

Is there any evidence to back this up?

I'll just point out two things.
(1) Their using CF-34 engines, for a plane just entering service in 2017. That's old technology. The competing ERJ-170 which also uses the CF-34 was in airline service in 2004, and is being replaced by a better plane with a better engine.
(2) You can find their order book at https://en.wikipedia.org/wiki/Comac_ARJ21

But really I don't want to debate this point. It's OK if we disagree.

kitplane01 wrote:

(1) Their using CF-34 engines, for a plane just entering service in 2017. That's old technology. The competing ERJ-170 which also uses the CF-34 was in airline service in 2004, and is being replaced by a better plane with a better engine.

Two points on this:

• Yes the ARJ21 is using the CF34. The engine is also used on the CRJ700/900/1000, which are still in production and aren't being re-engined yet. The E170 and E175 are indeed being replaced, however the E175-E2 has so far received only a single order for 100 aircraft from SkyWest Airlines, and it has been widely discussed here that this is in doubt because the aircraft is going to come in above the 86,000lb weight which triggers restictions in scope clauses of regional operators in the USA. But yes, I would give you that the ARJ21 doesn't appear to be the greatest proposition; certainly not helped by the lengthy gestation delay. Personally I would agree with your suggestion that it won't have a particularly grand future.
• The C919 is using the CFM Leap. The competing A320neo which also uses the CFM Leap entered service in 2016. I don't think we can accuse the C919 of using old technology when it comes to engines, and I would suggest it is premature to be writing it off as uneconomical just yet.

kitplane01 wrote:

(2) You can find their order book at https://en.wikipedia.org/wiki/Comac_ARJ21

Yes, an order book primarily made of Chinese financial institutions, which is definitely a little unusual compared to what we have seen from similar projects from Airbus and Boeing. However, to what extent is that a case of being commanded by central government to order them, as opposed to making a choice to invest in a programme that they feel will be worthwhile, or even investing in something that they feel will contribute to the advancement of their nation?

kitplane01 wrote:

But really I don't want to debate this point. It's OK if we disagree.

I'm not asking you to debate points. I'm hoping you can provide a bit more detail on a number of things you have stated as fact as opposed to opinion ("These planes likely have bad economics", "very few airlines outside of China will order them", "the non-advanced technologies involved", "Most people believe the orders these planes have received were commanded by the Chinese central government") so that this topic can be discussed properly. As it stands it seems like you are making quite a lot of assumptions and assertions which may or may not hold water.

V/F

Great points from kitplane and V/F, indeed OP's claim lacks evidence, but I want to talk about COMAC's plan in general.
ARJ-21 and C919 may or may not have bad economics, but as COMAC's first attempts at the civil aviation market, they are more like experiments and I will say COMAC can afford them to fail. The Chinese government is determined to enter this market and they hold a lot of power if those planes turn out to be less successful whether to force domestic airlines to buy those planes and subsidize the airlines or simply subsidize COMAC. Chinese government has huge budget every year I am sure a billion or two won't be a big issue. The government will mostly focus on the long-term plan that is to share the market with A and B and a few billion investment now will have a big return.

The CRJ is not exactly selling well lately. They have a backlog of 39 orders, and 14 of those are 8 years old and none of the 39 are from major carriers.

Neither of the planes have or will likely ever get FAA certification (esp the ARJ). So no sales to the worlds major carriers.

The Chinese can count the investment as long term R&D and sell the planes for just the marginal production costs. This would favor the Chinese planes. But the 737 and A320 lines are very efficient machines and I bet the Chinese can not undercut by a huge amount. Either way the Western avionics and engines will cost the same (or more due to low production rates).

On the subject of financial viability, both Airbus and Embraer generated massive losses for the first many years of their existence, but are both highly profitable today. Developing and maturing commercial aircraft is a long and really expensive process, and it would practically be impossible to start up a production of modern commercial airliners from scratch without significant amounts of subsidiaries. By the looks of it, China is trying to shorten this process by pushing out as many C919s as possible to their own Chinese airlines. They are essentially trying to take the losses right here and now, instead of stretching them out over a 20 year period.

ADent wrote:

Neither of the planes have or will likely ever get FAA certification (esp the ARJ). So no sales to the worlds major carriers.

The C919 will most likely get EASA certification, which is just as good or even better.

ADent wrote:

But the 737 and A320 lines are very efficient machines and I bet the Chinese can not undercut by a huge amount.

The 737 is ancient, and the A320 is getting up in the years too. Undercutting them isn't going to take much of an effort, and China has a reputation for having some very skilled aircraft designers. Besides, most of the efficiencies lie in the engines, and the C919 will feature the same engines as those other two.

Most analyses I have seen, indicate that the C919 is not quite so ambitious, and will only just match or slightly exceed the performance of the 737MAX and A320NEO. The MC-21 however will be superior to all of them by quite a bit.

I don't believe the performance will be better with the same generation of engines (same PIP etc.). But it will be close enough.

What will really matter is reliability, ease of maintenance, etc.

VSMUT wrote:

On the subject of financial viability, both Airbus and Embraer generated massive losses for the first many years of their existence, but are both highly profitable today. Developing and maturing commercial aircraft is a long and really expensive process, and it would practically be impossible to start up a production of modern commercial airliners from scratch without significant amounts of subsidiaries. By the looks of it, China is trying to shorten this process by pushing out as many C919s as possible to their own Chinese airlines. They are essentially trying to take the losses right here and now, instead of stretching them out over a 20 year period.

ADent wrote:

Neither of the planes have or will likely ever get FAA certification (esp the ARJ). So no sales to the worlds major carriers.

The C919 will most likely get EASA certification, which is just as good or even better.

ADent wrote:

But the 737 and A320 lines are very efficient machines and I bet the Chinese can not undercut by a huge amount.

The 737 is ancient, and the A320 is getting up in the years too. Undercutting them isn't going to take much of an effort, and China has a reputation for having some very skilled aircraft designers. Besides, most of the efficiencies lie in the engines, and the C919 will feature the same engines as those other two.

Most analyses I have seen, indicate that the C919 is not quite so ambitious, and will only just match or slightly exceed the performance of the 737MAX and A320NEO. The MC-21 however will be superior to all of them by quite a bit.

I have heard the same. Once the plane is FAA and EASA certified it will take a major chunk of the orders from Airbus and Boeing as it is not only more efficient, but also cheaper. Wouldnt be surprised to see a major order from Air Asia, Ryanair, Easyjet or even legacy carriers like LH. BA have already expressed an interest in the C919! If they get the C929 right (which they will) we could eventually see Comac's annual orders overtaking that of Airbus and Boeing!

intothinair wrote:

I have heard the same. Once the plane is FAA and EASA certified it will take a major chunk of the orders from Airbus and Boeing as it is not only more efficient, but also cheaper. Wouldnt be surprised to see a major order from Air Asia, Ryanair, Easyjet or even legacy carriers like LH. BA have already expressed an interest in the C919! If they get the C929 right (which they will) we could eventually see Comac's annual orders overtaking that of Airbus and Boeing!

I doubt it. Maybe after 10 to 15 years in service it will start seeing sales in the west, but not before then. They haven't even begun offering a stretched version of the C919 yet. But aiming for the west would be stupid - Asia is a much bigger market anyway. Realistically, I don't think the C919 will be a serious competitor in Europe until the second iteration comes around, a C919NG of some sort.

intothinair wrote:

BA have already expressed an interest in the C919!

Which was just a ploy to get better pricing from Airbus. They were never serious about it.

intothinair wrote:

I have heard the same. Once the plane is FAA and EASA certified it will take a major chunk of the orders from Airbus and Boeing as it is not only more efficient, but also cheaper. Wouldnt be surprised to see a major order from Air Asia, Ryanair, Easyjet or even legacy carriers like LH.

Not a chance.
Non of those large carriers will be ordering this iteration of jets from Comac regardless of how good they are. The lack of well developed global support infrastructure is a major reason why. Airlines do not maintain passenger jets in a vacuum - they demand and require a high level of support and replacement parts for the manufacturer. Comac needs time to develop this to a standard competitive with the duopoly.

The purpose of attaining EASA and/or FAA certification isn't any serious ambition to sell to major carriers, its to allow sales to domestic and client state carriers who can then, in turn, fly these shiny new (and generously financed) jets into EASA/FAA territory. That's a very smart and more realistic first step. I can see African carriers, Central Asian, maybe Latin America (Venezuela at some point?), and any PacRim/South China Sea countries who'll bite.

intothinair wrote:

BA have already expressed an interest in the C919! If they get the C929 right (which they will) we could eventually see Comac's annual orders overtaking that of Airbus and Boeing!

As already mentioned, BA statement completely hot air. C929 also won't be ordered by the West.

I'm not a naysayer - Comac will become a player - but not just yet, not with this generation of offerings, and its not because lack of quality or human talent. It will take them time to develop the support network and become good at it, which client state sales will afford them. But they need a decade or two of real world service outside their borders for this to really happen.

How will innovation in China stay competitive with innovation from western countries down the road?

DigitalSea wrote:

How will innovation in China stay competitive with innovation from western countries down the road?

Like everybody else before: They are standing on the shoulders of giants.
They'll get faster, show some synergetic rush ( shorter or longer ) and then will loose impetus.

Same like everybody else.

Look out for the indicators of loosing impetus like IP being seen as tangible and limited property.
For the US that rush was a 20..30 years window after WWII.

China is at the beginning of a cycle. Europe and more so the US are over the summit.

How about economics of the MC-21?