Today – August 30th – the three largest airlines in China all made announcements that they would each be purchasing 35 ARJ21-700 regional jets. This aircraft is a product of China’s COMAC – which stands for Commercial Aircraft Corporation of China.
The three airlines are Air China, China Southern Airlines, and China Eastern Airlines. In fact, all three are state-owned entities.
According to a transaction disclosure document filed by China Southern Airlines, the catalog price of a single ARJ21-700 aircraft is approximately US$38 million. “Such catalog price includes the price for airframe and engine”, the document reads.
This puts each 35-aircraft order at a list-value of US$1.33 billion with the total being 105 aircraft worth just under US$4 billion. Deliveries are scheduled from 2020 through to 2024, according to Reuters. As with most aircraft orders, the actual price is lower – this is seen in China Southern’s filings:
“The aggregate actual consideration for the Comac Aircraft, which is payable in cash, and determined after an arm’s length negotiation between the parties, is considerably lower than the catalogue price as provided by Comac because of the price concessions granted by Comac in relation to the Comac Aircraft.”
A government initiative?
According to Reuters, the carriers say the aircraft purchases aim to boost capacity in their regional markets. According to FlightGlobal, China Eastern says its order will address a “shortage of feeder capacity” and improve its network. China Southern makes a similar statement and says the order will “strengthen the support of the trunk-routes market” and “further expand the market coverage”.
However, identical orders on the same day from three state-owned airlines doesn’t seem like an independent decision from any one of the airlines. Could this be a state-sponsored initiative to boost its domestic aircraft manufacturing sector?
Video of the day:
Up until this point, only small Chinese airlines such as Chengdu Airlines and Genghis Khan Airlines have the ARJ21 of part of their fleets. Major orders of Chinese-made aircraft would ensure that money stays in the country instead of leaving for the competition. Manufacturers like Mitsubishi and Embraer have more firmly established regional jet programs.
About the ARJ21
The ARJ21 is a small jet aircraft that looks very similar to the old MD-80. Although there is a license to build the MD-80 in China, COMAC claims that its regional jet is an original design. In fact, COMAC claims part of the jet’s design is made by supercomputers in China.
According to FlightGlobal, without the recent orders by the three state-owned Chinese carriers, Comac has pre-existing orders for 233 ARJ21s from various carriers and lessors.
According to COMAC, the ARJ21-700 has a capacity of 78 to 90, depending on the cabin configuration. The jet has a range of 2,225 to 3,700 kilometers. COMAC also reports that the ARJ21-700 obtained Type Certification from the Civil Aviation Administration of China (CAAC) in December of 2014. Furthermore, a Production Certificate (PC) came from the CAAC July 2017.
Finally, COMAC is currently working on a larger aircraft – the C919. The jet will compete with aircraft like the Boeing 737 and Airbus A320.