China Breaks Airbus-Boeing Monopoly

Commercial Aircraft Corp. of China (Comac) has secured its first 100 C919 passenger-aircraft orders, breaking the near monopoly enjoyed by Airbus S.A.S. and The Boeing Co. (BA).

General Electric Co’s (GE) leasing arm and China’s three largest domestic airlines by fleet size were amongst the first customers for the 168-seater aircraft.

The development of China’s first passenger aircraft could hamper sales of overseas manufacturers in China, which is projected to place $480 billion worth of aircraft orders by 2029. Comac expects to deliver 2,000 C919s worldwide in 20 years, giving tough competition to Boeing’s 737 and Airbus’s A320.

GE has one of the best infrastructure franchises worldwide with solid organic growth rates, exposure to favorable secular trends and a large installed base supporting a growing annuity-like service business.

Infrastructure businesses from GE are helping build the energy, health, transportation and technology infrastructure of the new century. These businesses provide the products and services that help developing regions participate in the global economy, while also helping developed regions upgrade with cleaner, more efficient and better infrastructure technologies.

The financial business at GE offers an array of products and services aimed at enabling commercial businesses, consumers and markets worldwide to build a strong and financially secure future.

The company has adopted a strategic direction to strengthen its portfolio by building strong growth platforms and generating cash from low-return businesses. Its focus remains on accelerating organic growth and achieving technical and service excellence, while building enduring customer relationships around the world.

GE has products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products. Since its incorporation in 1892, the company has developed or acquired new technologies and services that have broadened the scope of its activities.

Honeywell International Inc (HON) is a leading supplier of electronics, consumable hardware, engine controls, environmental controls, landing systems, power systems, propulsion engines, aerospace services and space products and systems for the aerospace industry, including commercial and regional airlines, air cargo carriers, as well as original equipment manufacturers (OEMs) of commercial, regional, military aircraft and spacecraft.

Honeywell’s attractive collection of businesses has the potential to earn consistently above-average returns. The company’s focus on working capital management, free cash flow generation and balance sheet strength remain positive attributes in the current weak environment.

We are currently Neutral on both General Electric Co and Honeywell International.

BOEING CO (BA): Free Stock Analysis Report

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1 Comment on China Breaks Airbus-Boeing Monopoly

  1. Boeing spent at least fifteen years in China having them manufacture parts, avionics equipment, wiring harnesses, small sub-assemblies for Boeing aircraft, and increasing larger and more complex avionics systems and mechanical assemblies for Boeing aircraft.

    Boeing shared the increasing amounts proprietary technology for aircraft avionics systems, light-weight and very strong composite materials, and trained and shared the design and manufacturing IT tools to design, test, and build major avionics and mechanical systems, and major chunks of high-speed, long distance, large passenger aircraft.

    This was all done in pursuit of selling Boeing passenger aircraft to China. They succeeded in getting a large share of the Chinese airline market for Boeing.

    All of a sudden, we hear the aircraft industry; i.e. Boeing and Airbus, is surprised that China will soon be in a position to start competing with Boeing and Airbus using the latest manufacturing tooling and assembly plants, along with the latest design and manufacturing methodologies and tools to build medium-range and long range high-passenger aircraft.

    The aircraft industry will have a second surprise when China starts to go after the aircraft markets currently serviced by the Boeing Company and Airbus S.A.S. in the U.S., Europe, the middle-east, Asia, and Africa, as well as the China market.

    The problem in giving your potential market (China) all your proprietary assets in search of profits is that you become their potential market (U.S., Europe, the middle-east, Asia, and Africa) and source of profits.

    In short, China now knows substantially what Boeing knows about building commercial aircraft. And, they can do it at lower cost.

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