Embraer looks set to be the latest Western manufacturer to win a production deal with China. But can it succeed where so many have not?
Seven years ago Boeing, the former McDonnell Douglas and some of the then Airbus partner companies were fighting for equity involvement in an ambitious project China was pursuing for the development of an all-new 100-seat jet-powered airliner. The three groups boasted publicly of the bright future for the project and said they were truly committed to making it work, should they win the bid to join China's state manufacturing group Aviation Industries of China (now separated into AVIC I and AVIC II) as an industrial partner.
But a top Boeing China executive made some curious comments while the battle was taking place. When asked at a press conference in Beijing in October 1995 whether Boeing would, if rejected by the Chinese, try to build such a jet on its own, the executive said it was highly unlikely, even though he claimed there was a potentially huge market for such an aircraft in China and elsewhere in Asia.
"We already make an airplane with around 100 seats," he said, referring to the smallest member of the 737 family.
That comment was somewhat of a paradox. Boeing and the other major aircraft manufacturers were fighting publicly for participation in a programme that they claimed would be a huge success, while privately they knew it would probably never get off the ground. In reality it was a race in which the "winner"' would probably have been the ultimate loser.
Airbus later went on to "win" the contest and worked with China on studies of what was dubbed the AE31X. But talks ultimately collapsed in 1998 after the two sides failed to come up with a viable business case for the project. Airbus instead went ahead with a further shrink of its A320 - the A318 seating just over 100 passengers. But few saw the European manufacturer as the loser, despite the fact that Airbus's move to build the A318 on its own upset many in China. As compensation, Airbus handed more A320 wing work to China's state-run aerospace companies.
China has long held ambitions to develop a modern airliner on its own and few observers doubt this will happen sooner or later. What is not clear is whether the resulting product will be desired in the marketplace.
Now it appears history could be about to repeat itself as AVIC I prepares to launch its ARJ21 regional jet family - potentially in partnership with foreign groups - but there are important differences this time. Boeing has agreed to sign up as an engineering consultant on the project but will not become a full partner. The question being asked now, as Embraer is closing on a separate deal with AVIC II covering the establishment of anERJ-145 line in China, is whether the Brazilian manufacturer will be able to make a partnership work in a country where so many other foreign groups have failed.
In the 1980s and early 1990s, the world's major manufacturers fought for one of the first industrial partnership bids in China, the so-called TrunkLiner programme. McDonnell Douglas went on to win it, agreeing a deal to have MD-80/90s assembled from kits or built outright in China. McDonnell Douglas saw it as a major victory, believing it would lead to huge sales to the country's airlines, which it thought would effectively be forced to take hundreds of its twinjets. But Airbus and Boeing pursued a different route: they talked with the airlines directly, rather than only the government, about aircraft sales. As China's economy is planned, the government has the ultimate say on aircraft that may be operated, but airlines were at the time being urged to become more commercially viable and were gaining more and more power in making operational decisions.
Chinese airlines do not like being told which aircraft they should operate, and theMD-80/90s were as a result never seen as favourites. The TrunkLiner programme eventually died a quiet death, and Airbus and Boeing were the real winners, taking the bulk of the business in China.
Does this mean that industrial partnerships in China cannot work? Probably not, but the problems McDonnell Douglas faced can and probably will arise again with other manufacturers. In China the market potential is so enormous that the manufacturers feel they have little choice but to work with the government. After all, China's economy remains a planned one and is likely to stay that way for some time to come. But for Embraer it is vital that it learns from the mistakes made by some of its fellow international manufacturers. It cannot regard its "win" on AVIC II's regional jet bid as one that will automatically lead to a flood of sales in China.
Source: Flight International
