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Many questions surround Bombardier/Comac partnership By Jon Ostrower on April 1, 2011 4:19 PM | Permalink | Comments (10) | TrackBacks (0) | 
WEST PALM BEACH -- Two weeks ago when Bomabardier Commercial Aircraft President Gary Scott emphatically denied his company was pursuing a stretched CS500, pushing the CSeries into direct competition with the 737-800 and A320, many in the industry wondered why the Canadian airframer would rule out such a possibility. Within the context of the newly-signed Comac partnership, Scott's comments are now fully explained.
With no intention to compete or overlap products with Comac, Bombardier is cultivating a partner with seemingly limitless access to capital (and patience) to establish itself in both domestic and export markets.
If the duopoly wasn't dead before, the last nail in its coffin was hammered in on March 24.
The Sino-Canadian agreement opens the door beyond just Bombardier and Comac, with Pratt & Whitney CEO David Hess seeing opportunity to accelerate his company's "on-going discussion" with the Chinese airframer to offer its PW1000G on the C919, placing it in direct competition with the A320neo, on which the engine is also an option.
"We're not privy to the conversations between Comac and Bombardier, but clearly there could be opportunity for collaboration on all the platforms," says Hess.
Hess says Comac is studying applications of the PW1000G on the C919, ARJ21 as well as potential new designs.
"They're very excited about a geared turbofan," says Hess. "They know where we are in development, they've seen the engine. In fact, we've had Comac people down here at test stands. So they're pretty excited about it. Certainly their initial selection was Leap-X, they'll start a flight test program with Leap-X, but they seem to be very interested in flying the next generation product family, either on derivatives of the C919, the ARJ21 - they are studying possible applications for ARJ21 - and for and certainly clean sheet paper airplanes."
In the near term, Bombardier and Comac are set to begin commonality studies to find overlap between the 110 to 149-seat CSeries and 156-seat C919, opportunities exists where the same suppliers cover both aircraft, including, but not limited to, the aircraft's Rockwell Collins Pro Line Fusion avionics navigation and communication systems, Liebherr landing gear and Honeywell auxiliary power unit.
While the P&W may have a chance to add itself to that list of common suppliers, the opportunities created by the tie up is just one of the many questions that will begin to define the emergent strategic partnership and its potential to re-shape the global aerospace landscape.
Benjamin Boehm, Bombardier's vice president for international business, was instrumental in bringing this partnership to the fore. Having quietly left his post as vice president of commercial aircraft programs in November, the new role has his guiding the strategic machinations on an partnership that could crack the duopoly in a way Bombardier never could on its own.
The language of the press release points to significantly more than an "arms-length" partnership between the two companies, but the fundamental question for both partners in this deal is whether or not the actions reflect a long-term or short-term link up.
In the context of Piepenbrock's Red-Blue, is the partnership meant for the betterment and improvement of both OEMs with a stake in either's success? Or is this tie up a way to extract expertise and market access in the near term? The push toward commonality and part procurement would suggest that incremental technological and supply chain integration of the C919 and CSeries brings the two closer together in a way that the industry has never before seen.
Yet the key element Bombardier brings to the table may be less tangible, but no less useful for Comac. Creating discreet aircraft systems is far from a simple process, but integrating all those systems together into a self-sufficient airframe is the 'secret sauce' to building aircraft and Bombardier has this in spades. Tactically, the partnership allows an OEM-level of systems integration expertise to flow into the C919, one element missing from Chinese commercial aerospace.
"I think it will certainly give Bombardier access to the Chinese market place, and maybe some Chinese capital, and vice versa it will give the Chinese access to Bomardier's great technical and development capabilities," says Hess.
What remains to be seen is how Boeing and Airbus react to the partnership and whether or not the extensive efforts of both will remain sufficiently recognized by those in the central government as aircraft purchasing decisions are made with the 13th five year plan just beginning to take shape now.
Airbus was previously seen as having the biggest manufacturing presence in China with its Tianjin A320 final assembly line, while Boeing used selected structural component suppliers for all of its commercial programs. Bombardier has stepped beyond both, likely delivering access to the world's single fastest growing market.
No doubt with yesterday's publication of the WTO ruling, Boeing and Airbus have to be eyeing the Sino-Canadian partnership with great interest. How funds - if any - flow between the companies and their two governments, may spark a new chapter in the battle on research and development subsidies.
As the incumbent duopolists, any threat to Boeing and Airbus's status is sure to be met with fierce resistance, but does the tie up actually begin to tie the hands of the US and Europe who want the same access to China as they do today? With a strong desire to continue to sell their respective products in China, does any swipe at CSeries become an indirect swipe at the Chinese? Does a tie-up start to look more like a growing political alliance as the Airbus and Boeing - as mature players - fight to hold their industrial status?
The duopoly is dead, long live the duopoly. Categories: Bombardier, COMAC Tags: Bombardier, C919, China, Comac, CS100, CS300, CSeries, Red-Blue 0 TrackBacks
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10 Comments
By Auroraon April 1, 2011 5:24 PM | Reply
"There was a young lady of Niger
Who smiled as she rode on a tiger;
They returned from the ride
With the lady inside,
And the smile on the face of the tiger. "
By Biggles209on April 1, 2011 6:18 PM | Reply
"Two weeks ago when Bomabardier Commercial Aircraft President Gary Scott's emphatically denied his company was not pursuing a stretched CS500..."
If he denied he was not pursung, he confirmed that he was pursuing - which makes no sense relative to the rest of this article!
By V Von April 1, 2011 7:49 PM | Reply
There was a speculation about Bombardier tie-up with another manufacturer. At that time an analyst thought that there was a possibility that Bombardier would build a partnership with Boeing. I discussed about this speculation in my blog entry in June 2010 http://wp.me/piMZI-VX
The recent announcement about BBD-COMAC cooperation clearly removes any possibility BBD-BA partnership.
The narrowbody sector is quite crowded and the competition will become even more fierce. The real duopoly battle between Boeing qnd Qirbus is now in the widebody-long-range sector. I discussed this in the following blog entry: http://wp.me/siMZI-duopoly
By JCon April 1, 2011 9:56 PM | Reply
To defeat the tiger and rescue the beauty as well as itself Boeing needs to do the following:
1. Improve 737 and sell it at cost to render all newcomers profitless. (In reality there still is profit for Boeing though it goes to American workers in the form of salaries, thus the project should be considered a social welfare work, which most of the newcomers will be doing anyway).
2. Develope 797--Boeing does not suffer from 787 for nothing. Use monolithic composite technology to develope its patented flat fuselage with twin-aisle 2-3-2 that maintains the same efficiency as the competitors' but add on 20 to 30 more seats than the competitors' to be the bonus profit for airlines.
By Nicolason April 2, 2011 9:46 AM | Reply
This partnership will not prevent Bombardier to launch a 150 pax CSeries (CS500). The CS500 will be a little bit smaller than the C919 (range and size). The CS500 will be perfect for european carriers : 150-160 passengers with a range of 1800 nm or 2400 nm (ER version).
Some rumors also say that Bombardier could possibly launch a new family of regional jets (70-100 pax) to replace the CRJ in partnership with COMAC.
By Frank N Steinon April 3, 2011 6:47 AM | Reply
Jon,
IMO you hit the nail on the head. It's the "holy sauce" of configuration and systems integration that the Chinese lack. The tie-up may well include fixing whatever bedevils the ARJ21, which so far has made a very pedestrian 'progess' in flight testing.
Then the C919 - the Chinese are nowhere near being able to pull it off alone. Someone has to do the wing, the overall configuration, then the structural concept, then the systems integration. Not to mention handling qualities or certification to FAA/EASA standards.
I wouldn't expect Airbus and Boeing to have much interest to come to the rescue. The Latinos are too proud and I don't see what they'd win. In contrast, Bombardier could at least help the Chinese to keep their face without 'selling the farm', in exchange for continued transportation business. Of course, it must not look like a rescue operation, hence the vague baseline strategic agreement.
By Integral Observeron April 4, 2011 1:04 AM | Reply
Jon, I have enjoyed seeing your growth from being just an airplane guy to one who truly understands the airline business. This integrated knowledge has made you a first rate business journalist. Kudos to you and Dr. Piepenbrock for helping us all to grow our understanding of how business really works.
As I read through the comments of your many intelligent readers, I am able to beginning to discern a pattern. It seems that both EADS and the Chinese (COMAC) have had the opportunity to learn from Dr. Piepenbrock’s work and are now benefitting from it. On the surface, the COMAC/Bombardier linkup is a win-win for both parties. In the short-term, the BLUE Bombardier wins with near term orders and a needed cash infusion. In the long-term, the RED COMAC is able to get the airplane integration and certification knowledge they need to be an effective competitor.
In other industries, China has shown a willingness to leverage the short-term desires of companies to make a near term profit, to gain the technical knowledge needed to compete globally. Once they gain this knowledge, the Chinese end their cooperative relationship and become able competitors. This relationship does not bode well for Bombardier in the long-term.
By RedvsBlueon April 4, 2011 8:32 PM | Reply
Jon,
While many questions surround the Comac/Bombardier partnership, I believe that Piepenbrock's Red/Blue theory provides a predictive model that can inform customers, employees, suppliers, and investors alike.
As Integral observer stated, "Blue" Bombardier is giving away key intellectual property in terms of certification and aircraft systems integration knowledge in order to obtain short-term market share growth; rather than growing organically and investing in product and process development to grow it's long-term market share. Similar to high-speed trains and solar power, China's Comac will end it's "partnership" and capital infusion to Bombardier once it has the technology know-how and reputation it needs to scale its aircraft industry.
By Paulo Mon April 5, 2011 3:56 AM | Reply
Is there no longer sign-in requirement for comments?
To the topic at hand, looks like Rome is quite eager to teach China how to spin gold threads -- i.e. silk...
There will always be room for foreign companies in the Chinese market, but they will become minor players, as evidenced by this New York Times piece on wind turbines/wind energy: http://www.nytimes.com/2010/12/15/business/global/15chinawind.html?_r=1&pagewanted=all
By JCon April 8, 2011 4:23 AM | Reply
Chinese idiom:
"in, tsen, tse, ke"
--- (literally) to drink poison in order to quench one's thirst.
A New Practical Chinese-English Dictionary says: "A moment's relief or pleasure can bring endless sufferings to come".
Aside from technical savvy, Bombardier may need to develope a few antidotal tricks too.
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