An artist's rendering of Bombardier's C-series jet.
Bombardier Inc. is tying the success of its C Series jet in the massive Chinese market to that country's largest airplane maker, signing a deal that will help it attack the duopoly of Airbus and Boeing.
The Montreal company and Commercial Aircraft Corp. of China Ltd. (Comac) have agreed to co-operate as they develop planes that will take on the two giants, which dominate sales of narrow-bodied aircraft - the largest segment in the commercial airplane market and one that will grow even more as Chinese airlines mushroom.
The potential for collaboration between the Canadian and Chinese companies on new aircraft - plus marketing, procurement and customer service for their C Series and C919 aircraft, respectively - represents a strong joint challenge to Airbus SAS and Boeing Co., which also see China as a critical market over the next two decades.
"We believe that this collaboration will generate positive results for both the C919 and C Series aircraft programs," Bombardier chief executive officer Pierre Beaudoin said in a statement.
The C Series, which fits into the 100- to 149-seat class, will come in at the low end of the narrow-bodied or single-aisle market. The C919 will offer between 160 and 200 seats.
The deal comes amid major turbulence in the narrow-bodied or single-aisle market, where airlines are being battered by soaring jet fuel costs and new players such as Bombardier and Comac are offering fuel savings of 20 per cent over existing planes.
In addition to Bombardier and Comac, a Russian company plans to enter the segment and Embraer SA of Brazil is considering moving up into it as well from the regional jets it offers.
Airbus has responded to the new competition by saying it will offer new, more fuel-efficient engines on its A320 planes, beginning in 2016. That's three years after the C Series is scheduled to enter service and the same year that Comac's C919 is set to take off.
After the Airbus move of late last year, the industry is now awaiting a response from Boeing, which has said it is more likely to offer a replacement plane for its 737 by the end of the decade, rather than offer new engines.
Bombardier has 90 firm orders for the C Series from North American and European airlines, but clearly sees China as a crucial market for the plane, which represents a major step in size and scope beyond its existing business jets, regional aircraft and turbo props.
Chinese airlines have few planes in the 100-149 seat segment now, Ben Boehm, vice-president of international business for Bombardier Aerospace, said from Beijing on Thursday. In addition, China plans to construct about 100 airports during the next 20 years, Mr. Boehm added.
"The traffic growth potential for China is exponential," he said.
The deal with Comac is another element of Bombardier strategy to win Chinese customers for the C Series.
It has awarded the contract to build the plane's fuselages to Shenyang Aircraft Co. of China. Earlier this month Bombardier signed a deal with ICBC Financial Leasing Co. Ltd. of China that provides $8-billion (U.S.) worth of financing for Bombardier customers.
In another move, the company escorted Chinese President Hu Jintao through its Toronto factory during the G20 summit last year.
"They're trying to lock down the Chinese market and they're probably going to be successful," said analyst David Tyerman, who follows Bombardier for Canaccord Genuity in Toronto.
"I'm assuming none of this would have happened with government knowledge and support," Mr. Tyerman said.
The C Series and the C919 will not offer the same engines, but Mr. Boehm said one area the companies plan to tackle is using the same components on other parts of the plane.
"Commonality means lower operating costs, it means lower training costs, it means lower maintenance costs for airlines and when you get that ultimate benefit what it will translate back to Comac and Bombardier is more sales," he said.
The global market for single-aisle planes is expected to provide sales of $1.4-trillion for airplane makers by 2029. Much of the growth in that segment will come from China.
Bombardier forecasts that Chinese airlines will buy 1,400 planes in the 100-149 seat segment by 2029. Based on a list price of about $60-million, that would represent revenue of $84-billion for the world's aircraft makers..
China has been a big market for Boeing, But Airbus has made some inroads and is producing A320 planes in China, said Richard Bitzinger, a senior fellow at the Rajaratnam School of International Studies in Singapore and an expert on the Chinese aircraft industry.
"These airlines are mostly operating Boeing aircraft, but lately have been buying some Airbus jet liners, especially when the Chinese want to express their disapproval of U.S. actions, such as selling arms to Taiwan," Mr. Bitzinger said.