Washington state isn’t worried about China’s new plane – yet | McClatchy Washington Bureau

China’s announcement this week of a domestically produced passenger jetliner, which would directly compete with the ones made by Boeing and Airbus, isn’t a big deal for Washington state’s heavily aerospace-based economy yet, experts say.

Chinese airlines, which buy one airplane in every four that Boeing builds, would have the option to buy the C919 jetliner, domestically produced by the state-owned Commercial Aircraft Corp. of China, known as Comac, instead of purchasing American planes from Boeing or European planes from Airbus.

If China’s buying power turned away from the aerospace giants, it could be a big hit to Washington. Passenger planes and their parts made up over half of the state’s exports in 2014, at almost $48 billion, and China was the top importer. China added 23.8 percent more imports in 2014 from 2013, according to the Census Bureau.

Despite those numbers, the announcement of the new airplane isn’t affecting Boeing much, said Darren Hulst, managing director for Northeast Asia regional marketing at Boeing. The company has accounted for other countries’ desire to break into the lucrative single-aisle passenger jet market and doesn’t see China’s announcement changing customers’ behavior for the next five to 10 years, Hulst said.

With an anticipated demand for nearly $1 trillion worth of Boeing airplanes for China in the next 20 years, and with 300 orders worth approximately $38 billion already underway, China’s airlines are Boeing’s biggest buyers and a market that Hulst said Boeing will continue to work in and grow, even with the new native competition from Comac.

In 2008, Boeing was making 28 737s a month, and today, the company produces 42 a month. “Seventy percent of that growth is due to the change in demand from China,” said Hulst. “We view our success in China as our success as a company.”

Comac has a long way to go to make a plane that would compete with Boeing’s 737 or with Airbus. Production, test flights and governments’ approval would take years, said Amandine Noel-Crabtree, the aerospace business development manager at the Washington State Department of Commerce.

“I don’t think it’s a threat,” Noel-Crabtree said. “If you’re talking the next 20 years or the next century, but for the time being they’re pretty far behind Boeing or Airbus in that regard.”

A majority of the components for state-owned Comac are required to be built in China, but the company eventually will outsource for parts to be competitive, opening an opportunity for Washington’s supply chain, she said.

Kelly Maloney, the president and executive director of the Aerospace Futures Alliance, agrees that the Chinese plane could be good for business in Washington, as parts suppliers could see more work.

“Even though this is a ways off, it’s something that we need to realize could impact our economy, but it could impact our economy in a positive way,” Maloney said.

Ramping up the production infrastructure of the Comac plane will be a major challenge for the state-owned company, said Jesse Rogers, an associate economist at Moody’s Analytics who studies Washington state. Boeing and Airbus have the global reach to produce things quickly and cost effectively.

“They don’t have the production scale in place to provide a cost-competitive jet,” Rogers said. “I don’t think China’s new jetliner is going to displace demand for (Boeing and Airbus) for quite some time.”

A concern nearer in the future is that China’s current economic stumbles could bleed into a recession that would affect Chinese consumers’ demand for luxuries such as plane tickets.

China saw wildly yo-yoing stock prices, a slowing economy and currency devaluations this summer, and despite the government’s multiple attempts to stimulate growth, it’s not looking much better.

A lower demand for plane tickets could lead Chinese airlines to cancel their orders outright as early as the second half of 2016, Rogers said, if China’s recession turns to something worse than expected.

Order cancellations would be extremely unusual, said Bob Baker, a senior forecast analyst at Washington state’s Office of Financial Management, because airline companies and manufacturers focus on the long run, as planes can last for 10 years or more.

“When Boeing and other manufacturers make their forecasts, they go out 10 to 20 years,” Baker said.

Boeing’s long-term market outlook, for example, extends estimates to 2034.

“If there is going to be a recession, it’s something they acknowledge but look beyond,” Baker said. “They’re looking to fulfill a demand that is way out into the future.”