BOEING AND AIRBUS; TWO DOGS FIGHTING OVER A BONE: AND HERE COMES COMAC!

INTRODUCTION

‘1000 billion’ is a number to remember. 1 trillion is the weight of the civil aviation industry in the global economy and is comparable in revenue to sectors such as shipping, semiconductors, or the pharmaceutical sector. Inexpensive Chinese fighter jets hardly fall short compared to expensive Western weapon systems. It illustrates once again how China is breaking into industrial sectors that were previously dominated by Western technology, capital, patents, know-how, and reputation.

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In almost every domain, China is slowly but surely closing every technological gap. It has secured almost all the raw materials in the world and controls nearly every mining, refining, and industrial processing operation. China is now building formidable fighter jets. But what about commercial airplanes, a market dominated by two players: the European Airbus and the American Boeing?

Boeing’s problems are well-known. It has quality issues that are linked to a deteriorating workplace culture. It fails to resolve deeply rooted issues in the development of the 737max and 787 ‘Dreamliner’, causing their rollout to continue to be delayed. That is a financial drain. All those problems are well-known and we will leave them out of this publication.

WILL BOEING STILL EXIST IN 10 YEARS?

It is downright baffling how a company like Boeing manages to incur losses. Actually incomprehensible.

Boeing builds over 300 commercial airplanes each year and supplies parts for the more than 14,000 commercial airplanes that are in the air every day. It has thousands of airplanes on order and the order book is filled to the brim for the next 10 years. Boeing has a market share of still 40% in the global commercial aviation sector, a market that continues to grow every year. Analysts do not see this trend reversing anytime soon.

Boeing has another trump card. Besides commercial airplanes, Boeing is a key supplier to the Pentagon, by far the largest military contractor in the world. The Pentagon accounts for 44% of Boeing’s annual revenue because the U.S. maintains a larger defence budget than the next 9 countries combined in that arms spending top 10.

And yet, Boeing has managed to incur losses for 5 consecutive years and continues to pile up losses and backorders. Those losses have increased by $35 billion over 5 years. In the 4th quarter of 2024, Boeing recorded another loss of $3.8 billion.

Boeing’s only competitor is Airbus, a European consortium that delivered its first commercial aircraft 50 years ago. Commercial aviation is a duopoly in which Boeing and Airbus divide the market between them. Even in that privileged position, Boeing fails to achieve record profits. “What if that privileged position is undermined?”, because that’s exactly what’s about to happen.

Where Boeing previously only had to deal with Airbus, a very formidable competitor is now joining the fray. The Chinese Comac. A rapidly growing semi-state-owned company with enormous ambitions. Analysts see on the horizon how Comac will soon capture and take over the global market. This seems to spell doom for Airbus and Boeing, with Boeing being the first to go under. In this publication, we examine why that bold statement might just be true.

TODAY’S SITUATION

In the past 7 years, since 2018, when the sector still set a production record, the aviation sector has produced fewer and fewer aircraft. Boeing and Airbus are failing to timely renew the fleets of existing customers, let alone meet the growing market demand with additional aircraft.

Where in 2018 the sector still produced more than 1,800 airplanes, that number fell to less than 1,300 airplanes in 2024. That’s 30% less than six years earlier – and this while the aviation industry is breaking all records in terms of occupancy and passengers.

The number of passengers reached a record high of 4.9 billion in 2024 and is set to surpass five billion this year. The global number of revenue passenger kilometers (RPK) has increased by nearly 4% compared to the peak in 2019.Nevertheless, the order book with delayed deliveries currently stands at more than 17,000 jets – a record. At this rate, it will take 14 years before all outstanding orders are delivered. Since 2019, delivery times have doubled with an average waiting period increasing from 7 to 14 years.

The shortage of airplanes means that more and more airlines are being forced to fly with increasingly older planes. As a result, the average age of the global fleet has increased by nearly a full year in 2024. And that age takes its toll on fuel efficiency, as older and aging aircraft consume significantly more than young and new aircraft. Older airplanes are also more expensive to maintain.

If you notice within a short period how tickets become 1.5% to 2% more expensive every year, then you know why.

THE NEAR FUTURE

Unchanged trend lines predict how by 2035 the number of kilometers flown in global civil aviation will increase by 40%.In that same period, Chinese civil aviation will also grow by 40%.That’s not a matter of coffee grounds, tea leaves, or trend lines, but of the old reliable planned economy. In that same period, the rapidly aging Chinese fleet of around 4,500 aircraft needs to be renewed. By that time, that fleet of 4,500 units will have grown to 8,000 units.

In the growing economies of Central and South America, Asia, the Middle East, and Africa, the demand for airplanes is increasing by an average of 5% per year, and this for the next 25 years⁴. But if Airbus and Boeing fail today to meet the current demand and fail to renew the aging fleet, how do they think they will serve a growing market?

The bottlenecks are known: shortages of factories, facilities and capacity, raw materials, semi-finished products, and a shortage of skilled personnel. And that’s exactly what China has. The Chinese Comac is advanced and is about to launch its first commercial airliner on the market. At the beginning of this year, a production target of 50 units per year was set. That ambition has since been raised to 75. But even that number seemed too modest, so Comac announced it would set up a production capacity of 200 aircraft per year by 2029. And we have seen in the past decades how tightly and quickly things can move in China. For Chinese planners, there are very few practical obstacles between dream and deed.

Just as Airbus introduced its market-disrupting A300 in 1974, Comac is poised to break into that same ‘narrow-body’ segment 50 years later.With the C919, Comac⁵ is launching a direct competitor to the Boeing 737 and the Airbus A320.

The first market that Airbus and Boeing are at risk of losing is the Chinese market because, in its home market, Comac is assured of immediately 4,500 Chinese airplanes that need to be replaced in the next 15 years. And although the first examples still need to be internationally certified, Comac already has an order book of around a thousand aircraft. China’s neighboring countries, all of Southeast Asia, the BRICS+, and by extension the entire Global South are more than eager to do business with China. And more and more will.

And while Comac is capturing the market share of the A320 and 737 with the compact C919, Chinese engineers are steadily working in the background on the C929, which will provide an affordable alternative for the intercontinental ‘wide-body’ segment. With both platforms, Comac covers the entire catalog of Boeing and Airbus.

PRICE AND BIZZ IN TIMES OF TARIFFS

The production cost and competitiveness of Boeing are under pressure. Trump Tariffs make an American airliner noticeably more expensive because Boeing purchases so many components and semi-finished products in China, on which higher import duties are now paid. The reciprocal tariffs that China has imposed add to that and harm Boeing’s price competitiveness in its main export market: China.

Xi Jinping had previously restricted the import of the 737max. In response to the American tariffs, China has now extended that import ban to all Boeing aircraft. Whether this moratorium will be lifted after the stipulated 90 days is subject to negotiations.

Boeing has not received any significantly large orders from China since 2019. When it is finally able to deliver the aircraft that were ordered years ago, albeit with much delay… that delivery is suddenly postponed today. This time not by Boeing, but by the customer.

When a medium-sized Chinese airline like Juneyao Airlines⁷ (a low-cost carrier with around 100 aircraft) indefinitely postpones the delivery of long-awaited aircraft, it reveals the cautious stance that airlines are adopting. They want clarity first on trade wars, import duties, and the final cost before they take delivery of the aircraft.

What applies to finished devices also applies to spare parts. Those are also subject to import duties, causing operational costs for the companies to rise further recently. The majority of Boeing’s spare parts are produced and imported from abroad. In aviation, we see the same hesitation that is observed in all other markets. An uncertainty that leads to the postponement of both investments and long-term framework contracts. Everyone is waiting to see what happens after that temporary 90-day suspension.

Ed Bastian, the CEO of Delta Airlines, says he no longer has a clear view of the exact cost of an airplane or how much it costs to keep it in the air. Delta Airlines is the world’s second-largest airline, has around 1,000 aircraft, and purchases an average of 40 new aircraft each year. Ed Bastian informed Boeing that all scheduled deliveries are being postponed indefinitely. The parking lot in Everett, Washington, where the 737max, 767, and 777 roll off the assembly line, is now quite full. If airplanes suddenly become 20% more expensive, both in purchase and maintenance, then the numbers don’t add up anymore.⁸

Boeing has not received any significantly large orders from China since 2019.When it is finally able to deliver the aircraft that were ordered years ago, albeit with much delay… that delivery is suddenly postponed today. This time not by Boeing, but by the customer.

When a medium-sized Chinese airline like Juneyao Airlines⁷ (a low-cost carrier with around 100 aircraft) indefinitely postpones the delivery of long-awaited aircraft, it reveals the cautious stance that airlines are adopting. They want clarity first on trade wars, import duties, and the final cost before they take delivery of the aircraft.

What applies to finished devices also applies to spare parts. Those are also subject to import duties, causing operational costs for the companies to rise further recently. The majority of Boeing’s spare parts are produced and imported from abroad. In aviation, we see the same hesitation that is observed in all other markets. An uncertainty that leads to the postponement of both investments and long-term framework contracts. Everyone is waiting to see what happens after that temporary 90-day suspension.

Ed Bastian, the CEO of Delta Airlines, says he no longer has a clear view of the exact cost of an airplane or how much it costs to keep it in the air. Delta Airlines is the world’s second-largest airline, has around 1,000 aircraft, and purchases an average of 40 new aircraft each year. Ed Bastian informed Boeing that all scheduled deliveries are being postponed indefinitely. The parking lot in Everett, Washington, where the 737max, 767, and 777 roll off the assembly line, is now quite full. If airplanes suddenly become 20% more expensive, both in purchase and maintenance, then the numbers don’t add up anymore.⁸

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