Paris Air Show: Rival planemakers have Boeing and Airbus in their sights

Aerial shot of the Paris Air Show

As usual, the Paris Air Show has been dominated by the two big beasts of the industry.

Will Airbus announce more orders than Boeing? Will Boeing have more products on display than Airbus? Whose vision of the future of air travel looks most credible?

But below the radar are signs that this duopoly may one day be challenged. China and Russia have a huge presence in Paris.

Canada's Bombardier is within days of the first test flight of its much-anticipated C-Series aircraft, arguably the most serious potential rival in the 100-200 seat narrow-body, or single-aisle, market dominated by Airbus's A320 and Boeing's 737.

That market is forecast to be worth $20 trillion (£12.8tn) over the next 20 years. There are a lot of contracts for new entrants to aim for.

Meanwhile, further down the aircraft food chain are regional planemakers Embraer and Mitsubishi. Both are thought to have plans for larger planes on their drawing boards.

Canada's Bombardier is within days of the first test flight of its much-anticipated C-Series aircraft

Guy Hachey, president of Bombardier's aerospace operation, is keen not to overplay his hand when talking about competing with Boeing and Airbus.

"We are scratching around at the bottom. We are, maybe, an irritant," he says.

But the C-Series' acknowledged improvement in fuel efficiency - a result of a new-generation engine and use of advanced composites - has already prompted Airbus and Boeing to make new variants of existing aircraft.

China's ambitions
A C919 prototype on show in Beijing in 2011 Comac hopes its C919 will be the plane of choice for Chinese airlines

At the Paris show, Bombardier and Commercial Aircraft Corporation of China (Comac) announced plans to expand a cooperation deal.

It will involve sharing "commonalities" between the C-Series and Comac's proposed C919 aircraft. There will be no cooperation on flight testing, but rather in areas such as suppliers, customer service, and some technical issues.

Find out more

The Patrouille de France acrobatic team performs its flying display at the Paris International Air Show on 24 June, 2011

BBC News will be reporting from the Paris Air Show from 17-23 June

You will be able to find out the latest on BBC World News TV, on BBC World Service radio and on the BBC News website

It means, says Hachey, that Bombardier gets to strengthen its partnership in what will be the single biggest market for aircraft over the next couple of decades. And Comac gets to draw on Western expertise to help push along its civil aircraft ambitions.

Boeing estimates that China will have about 2,200 civil aircraft by 2020, with the market dominated by single-aisle aircraft.

Comac sees its C919 as grabbing a large slice of orders from domestic airlines. And given the size of the Chinese market, these orders should be enough to underpin the industry until other international airlines are convinced of the planes' operability.

The C919 is due to be rolled out in 2014, with deliveries in 2016. But the aircraft has already been delayed and few people would be surprised if that timetable slipped further.

Almost 50 Russian companies are at the show, most operating under the wing of United Aircraft Corporation, the state-run enterprise formed in 2006 to boost the domestic aircraft industry. The Kremlin is putting about $40bn into the civil sector over the next two decades.

Aeroflot order
Kirill Budaev, vice president, Irkut (file photo) Kirill Budaev says Russian planemaker Irkut can rival Boeing and Airbus

The Irkut MC-21, developed at a cost of $5bn, is the great hope of Russian civil aviation. The huge mock-up at the air show looked and felt every inch the new-generation airliner it wants to be. But a static display at an air show is a lot different to an aircraft that can fly.

Start Quote

At every air show there seems to be more smoke - but still very little heat and light. In commercial terms there is very little activity”

End Quote Richard Aboulafia Analyst, Teal Group

Despite much speculation about the MC-21's development timetable, Kirill Budaev, vice president at Irkut, insisted that there will be a maiden flight in 2015, certification in 2017, and then a delivery programme starting in 2020.

And he is very clear where he wants Irkut to be in a couple of decades - building a family of aircraft that will knock either Boeing or Airbus off their perch, or join them as a third force in global aviation.

"We can match Boeing and Airbus. Look at the growth in aviation. There is plenty of business to be done. We will be there: third, second, first in the market," he says.

Russia is putting in place a tax regime that will help its domestic aircraft industry, Mr Budaev said.

Tax breaks that allow domestic airlines to buy foreign aircraft more cheaply are being phased out, to be replaced by leasing deals - underwritten by Moscow - that will benefit overseas airlines buying Russian-made planes.

"We will provide customer support," Mr Budaev says. "We will do what we can to help."

Times change

These are bold claims, and bold ambitions. But history shows that manufacturers can displace the incumbent market leaders. It just takes a long time.

The UK aircraft industry was eventually eclipsed, while Airbus was, after all, once an under-rated upstart.

The launch of the A320 Airbus' A320 made its first flight in 1987
The launch of the Boeing 747 Boeing rolled out the first 747 in 1968

Rob Morris, senior analyst at the aviation consultancy Ascend, says: "Airbus was forced to innovate with the A320 and continued to innovate to achieve the position it shares with Boeing today. Embraer 'innovated' their way into the regional market and forced the incumbent manufacturers to exit."

He does not underestimate the development and entry-into-service challenges faced by Irkut or Comac, but he is in little doubt that they will deliver into domestic and adjacent markets.

And in doing so, the Chinese and Russian manufacturers "will also have gained experience of design, manufacture and delivery of large commercial which they will leverage into their next programmes, either wide-body or single-aisle," Mr Morris says.

EADS boss Tom Enders was sounding upbeat at the Paris Air Show

But the sceptics are many. Richard Aboulafia, analyst at Teal Group, says: "At every air show there seems to be more smoke - but still very little heat and light. In commercial terms there is very little activity."

He believes that the Bombardier C-Series has the best chance of breaking through, but he then cites a startling statistic.

Airbus and Boeing have about 3,000 orders for their next-generation aircraft. Orders for Bombardier's C-Series are 177. "That's not enough to make it a success," he says.

As for the Russians and Chinese, it's the fact that the state is backing the projects that means they will struggle. "Government agencies trying to get into a commercial field - frankly, it's embarrassing," he says.

He believes that any new entrants will have to sell their aircraft at a serious loss for a decade to compete. "You will always be playing catch-up," he says.

But aircraft companies - and governments - are used to playing the long game. That's the nature of the industry. And Moscow and Beijing certainly have pretty deep pockets.

Boeing chief executive Jim McNerney knows a challenge is coming. The "cozy world" of just two huge planemakers may be almost over, he said.

And that comment was made in July 2010.

More on This Story

More Business stories

RSS

BBC Business Live

  1.  
    10:45: MORTGAGE LENDING
    Mortgage lending graph

    Mortgage lending in September was 7% higher than the same moth a year earlier at £10.6bn, according to the latest figures from the British Bankers Association (BBA). That's down a bit on August's £11bn figure but not necessarily evidence yet of a slowdown. That said, the BBA says approvals for house purchase are 10% lower than a year earlier. Translated that means fewer people borrower more as house prices have risen.

     
  2.  
    10:30: FOXTONS

    Foxtons's shares are now below the price public investors first paid in their worst day of trading. The shares downsized 15%, or 30.8p, to the cosier price of 174.5p, well below the premium 230p investors paid in September 2013.

     
  3.  
    10:16: TESCO EARNINGS BBC News Channel
    analyst

    Jasper Lawler, retail analyst for CMC Markets, is on the News Channel, talking about Tesco's results. "I think the one box that's been ticked is the chairman will step down," he says. But there are no signs of selling any assets like blinkbox, the supermarket's video on-demand service, "there's no signs of strategy but maybe that's to come," he adds

     
  4.  
    10:00: TESCO EARNINGS
    Philip Clarke

    Former Tesco boss Philip Clarke's reported £10m severance package is being withheld until the outcome of the Financial Conduct Authority (FCA) investigation into the supermarket's accounting practice has been concluded it's also emerged. In case you're wondering the Guardian reported the pay advisory group Manifest summed this up as his £1.1m salary and share awards, although it didn't cover his pension pot. When he resigned in July Mr Clarke was expected to continue to be paid his £1.1m salary for one year.

     
  5.  
    09:45: RETAIL SALES
    Retail sales graph

    Retail sales volumes fell 0.3% in September compared with August. But September were 2.7% higher than the same month a year ago, marking the 18th consecutive month of year-on-year growth, official figures show.

     
  6.  
    TESCO EARNINGS Via Twitter Kamal Ahmed BBC Business editor

    tweets: Three big takeouts from Tesco numbers - accounts problem cost £263m, went back to 2013, chairman to leave, sales down 4.6%

     
  7.  
    09:21: MARKET REPORT

    European markets have opened down. The FTSE in London has lost 0.54% to 6,365.10, while Frankfurt's DAX dropped 0.01% and the French CAC declined 0.09%.

     
  8.  
    09:05: TESCO EARNINGS

    In fact things might be so bad that Tesco has decided not to provide full year profit guidance blaming "a number of uncertainties which limit visibility of future performance." It adds the "commercial income overstatement" will affect its second half results as it revisit its "plans with new management"

     
  9.  
    08:49: TESCO EARNINGS

    Tesco has also warned on its full year profits outlook. It says it is "reviewing all opportunities that exist within the group to generate value and create headroom. Full year profitability could therefore be further impacted by actions we choose to take." In other words, don't expect a turnaround over the next six months.

     
  10.  
    08:35: FOXTONS FALL
    estate agent

    Estate agents Foxtons' shares have fallen 18% after it said its earnings would fall due to a sharp drop in demand in the London property market. Foxtons said its third quarter sales fell 3% to £39.3m and said political and economic uncertainty in Britain and more restrictive rules on mortgage lending were the cause. This is the Foxtons who were told in 2009 their "renewal" commission from a landlord if a tenant stayed on past the initial tenancy period - even if the agency had played no further part in arranging or managing the extended tenancy - was unfair.

     
  11.  
    08:21: TESCO EARNINGS BBC Radio 4

    Brian Roberts of Kantar Retail is talking Tesco on the Today programme. He says some retailers -Aldi - have a far simpler business model than Tesco. They buy things to sell to their customers. But most supermarkets make more money through buying. And Tesco has been the biggest sinner here, he says by "extracting its profitability from suppliers" over the last few years as opposed to its customers. That's as a result of these supplier rebates we've been hearing about recently, which mean supermarkets get a discount on the goods they buy from suppliers if they hit certain sales targets. Hope that's clear.

     
  12.  
    08:07: TESCO EARNINGS Radio 5 live

    Jane Clark, author of the blog Frugal Queen has been talking Tesco on 5 live. "I do find it a bit pricey... they are more expensive than my local fruit and veg shop for greengrocery." Tesco "will have to price match with the discounters and be aware of how little money people have." She says they need to ditch buy one get one free on junk food because people want cheaper basics.

     
  13.  
    08:06: TESCO EARNINGS
    Tesco share graph

    Tesco shareholders have reacted badly to its interim results. The supermarket's shares have opened 6.5% lower to 171p.

     
  14.  
    07:54: TESCO EARNINGS

    Tesco's rather dramatic fall in statutory pre-tax profits is the result of one-off items totalling £527m, including an adjustment relating to "prior years' commercial income" of £145m, stock write-downs of £63m, impairment charges of £136m in the UK and Europe, restructuring costs of £41m, and another £41m retrospective charge relating to a Valuation Office ruling on ATM rates plus a £27m increase in the Bank's provision for customer redress.

     
  15.  
    07:44: REED ELSEVIER

    Media firm Reed Elsevier said underlying revenue growth for the first nine months of the year was 4%. It bought 25 firms for £294m.

     
  16.  
    TESCO EARNINGS Via Email

    Winston Collinge from Carlisle writes in: "Notwithstanding the upsurge of Aldi and Lidl, isn't it just the case that there is overcapacity in the food retailer sector and they are now fighting like dogs?"

     
  17.  
    07:31: DEBENHAMS EARNINGS
    Debenhams

    And now for something completely different. Department store Debenhams says like-for-like sales rose 1.0% for the year to 30 August. Profit shrank 24% to £105.8m as profit margins narrowed.

     
  18.  
    07:21: TESCO EARNINGS

    There's an update to the Deloitte investigation into Tesco's overstatement of its expected half year profit too. The amount overstated is up - a bit - and it's no longer a singular overstatement. Tesco now says the overstatement amounted to £263m in total. The impact on its trading profit for the first half of this year is £118m. But there is a further £70m overstatement from the previous financial year and £75m from before the 2013/14 financial year. Both of those have been treated as one-off items within this set of results.

     
  19.  
    07:12: TESCO EARNINGS

    Tesco chairman, Sir Richard Broadbent, has also announced his resignation although there's no timetable yet. He says: "My decision reflects the important principle of accountability on behalf of the Board and will support the company to draw a line under the past as it enters the next phase of its development." He has come under pressure to stand down since Tesco revealed that it had mis-stated its profit outlook for the first half of 2014/15 in September.

     
  20.  
    07:08: TESCO EARNINGS

    ... are out. UK like-for-like sales excluding petrol are down 4.6%. Statutory pre-tax profits are down 91.9% to £112m. The underlying profit figure for the period (26 weeks to 23 August) is down 46.6% on the same period a year earlier to £783m.

     
  21.  
    06:55: LLOYDS JOB LOSSES BBC Radio 4

    Mr Hahn tells Today the UK banking industry needs to do more in the way of community banks. He adds banks are beginning to link up with supermarkets as a way of doing this but local communities are likely to suffer as more bank branches close. He says it has been "an error" of government policy that "we keep thinking in terms of challenger banks". What the UK banking industry really needs to think much more about is community banking and how to provide banking services to small communities, he adds.

     
  22.  
    06:41: LLOYDS JOB LOSSES BBC Radio 4
    A Lloyds Bank logo

    The 9,000 job losses at Lloyds Banking Group amount to about 10% of its total workforce. It is also expected to announce a series of branch closures. Cass Business School banking analyst Peter Hahn tells Today the way we buy things from banks has changed. That's putting pressure on bank branches. He says we'll see "fewer but better bank branches". "We'll see them more principally located, so big cities and market [towns]," he says. Mr Hahn suggests they will be slicker operations, more sales-oriented, but not used as much for "regular transactions."

     
  23.  
    06:28: GLAXOSMITHKLINE Radio 5 live

    Newspapers are reporting GlaxoSmithKline may spin off its HIV business. Holly Cook, managing editor of Morningstar's website for UK investors tells 5 liveWake Up to MoneyGSK's respiratory drug, advair is under "intense competition" and a sale through a public offer "will allow GSK to streamline itself" as its HIV drugs see "huge demand".

     
  24.  
    06:15: TESCO EARNINGS Radio 5 live

    "Like-for-like sales is the first number analysts will look at, followed by the accounting problems," says Holly Cook of Morningstar on Wake Up to Money. The online business may have done well while the supermarkets will be a "weak spot." Looking at Tesco, "a lot of customers find it a bit overwhelming and you are bombarded by information and you can't find what you want."

     
  25.  
    06:07: TESCO EARNINGS Radio 5 live
    A Tesco trolley

    "When the CEO is on gardening leave the chairman should step up and that's not happened," says Mr Roberts on Wake Up to Money, talking about the performance of Tesco chairman Sir Richard Broadbent. The supermarket discovered a £250m profit black hole. "I'd be remarkably surprised if it's limited to a 6-month period," he adds.

     
  26.  
    06:01: TESCO EARNINGS Radio 5 live

    Brian Roberts of Kantar Retail is on Wake Up to Money talking about Tesco's results, out today. "There's lots of hoops you have to jump through" as a shopper at Tesco, he says. Buy one get one free, the loyalty card, driving a car and buying the petrol. "With Aldi you just have to turn up... Tesco used to have the shopper at the centre of the business and now they've replaced the shopper with the shareholder."

     
  27.  
    06:00: Howard Mustoe Business reporter

    Good morning. Get in touch via email bizlivepage@bbc.co.uk and twitter @BBCBusiness

     
  28.  
    06:00: Matthew West Business reporter

    Morning all. Now we could try and pretend that there is other news going on (and in fairness there is some) but let's face it, the focus today is all going to be on Tesco's half year results. We'll bring you them as soon as they drop, plus all the reaction and the rest of the day's news as it happens.

     

Features

From BBC Capital

Programmes

  • A virtual girlfriendClick Watch

    Using the latest tech to find friends on a night out and meet a virtual girlfriend

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.