China and Farnborough air show

So, the Farnborough air show took place this past week with a lot of fanfare. The Russians unveiled their "new su-35" fighter and MS-21 airliner. Bombardier signed the agreement with SAC to build the fuelsage for the C-Series. And as expected, the Chinese airlines bought a bunch of Boeing/Airbus planes and CFM/IAE engines. At the same time, the Chinese aircraft makers achieved nothing as we expected.

We've known for a while that China wants to learn from the West in aircraft design and manufacturing. It has done so in its cooperation with Boeing, Airbus, Bombardier and Embraer. The question is, do the Russians really have anything to offer to China? If you read the press release this week, the first thing that the Russians talked about were going through this project with China. You can see one of the reports for it here.

At the International Air Show in Farnborough outside London, which celebrates its 60th anniversary this year, Russian air companies are expected to sign a series of major deals with their counterparts.

The deals could cover both running projects, such as the Sukhoi SuperJet-100 civilian aircraft, and other upcoming projects. One of the latter is the MS-21 short- and medium-haul jetliner. Like the SuperJet, it is to be developed cooperatively with outside firms. In this case Chinese aircraft makers could become Russia's leading partners.

Alexei Fyodorov, head of Russia's United Aircraft Building Corporation, was somewhat cautious in announcing this news at Farnborough. Russia, he said, was not against a joint venture with China in the development of the "most ambitious Russian project."

This is not the first time the two countries have attempted to join forces in building an aircraft. In 2006, Russia proposed to China they both design and build a long-haul jetliner under a priority national project included in China's 2006-2010 five-year plan. As a starting point, Russia suggested the Russian-made Il-96-300. The results of this joint venture could compete with America's Boeing and Europe's Airbus.

Russia was clear about its motives. Its air carriers today need between 200 and 300 passenger liners of this class. Unfortunately, many of them cannot afford new models and opt for cheaper used foreign makes. This is why Russia needs overseas partners: to share the risk. The Chinese, however, declined the offer, and Russia had to cancel the program.

China's decision is understandable. They need aircraft designed for medium distances, and this is what they will build. One of them - the ARJ-21, seating 78-90 passengers - is expected to go into production in 2009. It was developed with the American firms and Ukraine's Antonov design bureau. Russia was left out in the cold.

Last year, China decided to build a medium-haul 150-passenger airliner, and in May of this year the Chinese Commercial Aircraft Company was set up in Shanghai.

But Russian producers have not abandoned hope. Sukhoi's General Director Mikhail Pogosyan visited Beijing late in May and said his company would cooperate with China in designing civilian aircraft. Now, at Farnborough, he is echoed by Irkut leaders, the corporation planning to build MS-21s.

Unlike Russia, China has never built its own passenger planes. The 1980 project to develop the 178-seat Y-10, a rival of the Boeing-707, ended in failure as did a later attempt to launch mass production of an airliner similar in design to a McDonnel Douglas model. It may be that the Chinese will now look more favorably at Russian proposals.

Russia needs cooperation. When Russian aircraft builders plan production quantities, they must know if their product will be in demand not so much in Russia as outside it. Industry and Trade Minister Viktor Khristenko said the domestic market in Russia is not large enough to make aircraft production commercially viable. In fact, Sukhoi Holding intends to sell 500 of the planned 800 SuperJet-100 models abroad before 2024. To make its position sure, it sold a blocking stake in its civilian segment to Italy's Alenia Aeronautica.

The importance of two large players appearing on the Russian aircraft market is hard to overestimate. They would be capable of eliminating the present shortage of short- and medium-haul airliners. In the next few years, the Sukhoi SuperJet-100 could replace the veteran Yak-42, as well as the Tu-134, which, in many cases, is being written off as scrap. The MS-21, once it enters the market in 2015, will not only replace the Tu-154 and Tu-204, but also the A320, which will have reached the end of its service life by that time. What's more, Irkut promises the MS-21 will be 15% lighter than its European cousin and consume 25% less fuel, a factor to bear in mind as jet fuel prices continue to soar.

Analysts say Russian air carriers will require 800 to 1,000 aircraft of various classes in the next decade. Russian aircraft builders will, unfortunately, be unable to prevail across the board. But medium-haul liners offer a glimmer of hope. Fyodorov says that the MS-21 and the SuperJet-100 can meet over 80% of domestic airline requirements for aircraft in this size range.

Next year, at another show in Le Bourget, France, Irkut is planning to announce the results of international tenders for the production of MS-21 components. It will perhaps be known by then if the Chinese will participate in the project or opt for building their own airliner.

It's understandable why Russia would want to involve China in MS-21 (or RRJ originally). China represents such a large market that it would allow any project to be successful. Despite having possibly the least capable of the 3 designs (ARJ-21, RRJ and MRJ), China's ARJ-21 looks like the most likely to succeed. With 171 orders from domestic carriers already + 7 firm and 20 optional for export, ARJ-21 is far leading the rest of the field. Despite Sukhoi blowing a lot of hot air claiming markets all over the world (including China), it has only received 12 oversea orders so far on top of over 100 Russian orders. The number of Russian airlines with needs for regional aircraft really shocked me as I am composing this blog. In the case of China, I don't think it can actually take any more orders (not enough production capability), but I don't think the same problem exists with Sukhoi. And even in the cases when Chinese airlines are not ordering ARJ-21, they are still ordering from Embraer instead of Sukhoi. At this point, I think MRJ is doomed to failure regardless of the number of technological advancements its claiming.

Back to MS-21, Russians are claiming 25% fuel efficiency over A320. Considering that Airbus and Boeing's next generation airliner are not coming out until 2020, logic would dictate that MS-21 would be the most efficient airliner in this class for 5 years. However, whether the Russians can really develop something that's as fuel efficient and environmentally friendly as the Western firms is questionable. At the end, they are not likely to want to share too much of their design "secrets" with China. This is not to say that the Russians are stingy in this aspect. They have shared far more of their aerospace technology with China than any of the Western companies. Based on the deal they struck with India for the 5th generation aircraft, I would think that Sukhoi would want to keep much of their core technology. China would get to do some outsourcing work and probably an assembly line. But, do they really want to continue to get the same deal that they already get from Airbus? Would the Russians really treat them as an equal partner in such a project? All the bargaining power rests with China in this case. Their market power attracts cooperations from all the major aircraft makers. They have made developing "large airplane" a national pride kind of project (along the line of project 921). If the Russians can't offer something that's better than the west, they would have no chance with China.

As for su-35, it was unveiled with much publicity this week. I guess the Russians have realized by this point that China is not interested in this aircraft due to their faith in the J-11 series. It's interesting that they are offering it to India. I wonder why would India even buy this aircraft with MKI project already so far along? And without these two large buyers, who else would be able to afford su-35 in large numbers? It will be interesting to follow the status of this project.