Will the China cycle come for Airbus and Boeing? | Hacker News Reader

Will the China cycle come for Airbus and Boeing?

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It's worse than that. Nobody other than Airbus seems to be able to make a good new medium-large jetliner. The C919 isn't very good. The Boeing 737 Max isn't very good, and it's a rework of a 1960s design. Boeing's New Midsize Airplane (the "797") was cancelled two years ago.

Embraer considered building one to extend their line of regional jets, but didn't. Bombardier never got that far. Mitsubishi got as far as building some 90-seat protype aircraft, then gave up in 2003.

There was immense pressure on Embraer by the US government not to build one. A stupid shortsighted decision by the US.

IMO Bombardier probably eventually could have gotten there too if Boeing hadn't lobbied the US government into making sure nobody bought the C Series. In the end they sold off the entire line to Airbus and it became the A220.

I'd live Embraer to do it. Their E195 is really class. Better comfort than a 737 despite being much smaller.

Airliners want cheap and efficient planes that don't require retraining their staff.

The name Airbus is disturbingly apt.

Is retraining the staff really that big a deal?

IIUC, they valued it at 1M per plane [1] and I guess list price of the Max is ~100M [2] so while 1% of the aircrafts value isn't nothing I think it gets completely dwarfed by operational costs.

Not sure how expensive their fuel but I have to imagine over the course of the plane's lifespan that fuel is going to be the primary cost (maybe maintenance / parts would be higher). So if you have to retrain your pilots to fly a plane that requires less fuel per passenger I think you'd come out ahead.

[1]: https://airinsight.com/southwest-and-boeing-the-cost-of-loya...

[2]: http://www.axonaviation.com/commercial-aircraft/aircraft-dat...

I think one of the biggest drivers here is the opportunity cost of taking pilots out of flying schedules to provide training on a new platform, and I imagine this is exacerbated by the ongoing pilot shortage.

Also there are operational efficiencies captured on the maintenance side of things, more streamlined parts inventory management, etc.

Then you also have to rework all your routes and contingencies. If you now fly more than one type of plane you have to make sure you always have a pilot available for right type of plain in a specific location if you ever need to restaff a route.

That’s all to say that adding a new plane platform to an airline is probably akin to a full replatforming of a production app. Sounds simple but there are tons of nuances with the actual execution.

It can create a lot of logistical problems if your pilots are qualified for different planes. Say your 737 Max pilot gets ill and you've got some 737 normal pilots sitting around but no Max ones. If they are not allowed to fly it and you have to cancel that costs big.

The CEO of Southwest wanted that. They buy only one kind of airplane, B-737 variants. This simplifies repair, parts, training, and staffing. Hence the 737-MAX, and the problems of the 737-MAX.

Let's start a company called Airtrain.

Bombardier's mini-train system for airports is called "Airtrain".

You realize that 10 years ago, you would never write this down, and you would get downvoted by even implying that Airbus is better than Boeing.

Reputation can be killed quite fast now, probably a side effect of social media

Boeing killed it's own reputation, it had nothing to do with any sort of 'media'.

stock prices and dead whistleblowers tend to do that

Two crashes and a blown out window plug helped.

To play Devil’s advocate for a moment, an ever-present Chinese competitor means that Boeing can’t keep fumbling and expect to maintain market position.

That dividend and stock buyback cash that was not put into R&D to make a better airplane? It has an opportunity cost.

None of the above has a moral or political judgement. The question of whether the US should care that it can’t build a plane is a separate policy question.

Nation state backed industrial espionage is a winning strategy!

IP protections give a company a monopoly on a product for a period of time. If the company uses that time to build an even better product, that’s great for the consumer. If the company uses it to gut their engineering department (who needs innovation anymore!) and enrich themselves, I am much less sympathetic.

The fact that our legal system can’t tell the difference between the two and the market doesn’t seem to care doesn’t mean we should pretend there isn’t a difference.

Come on, my good man: everybody really does it. Success in the 21st century needs you to account for the fact that it's a matter of if, not when your IP leaks to competitors.

Didn't Apple have to disable the oximeter on their smart watches because they copied Massimo? Or, what about the episode where Google sued Waymo cofounder Levandowski for stealing & transferring IP to Uber? Meanwhile, Uber had a thriving department devoted to corporate espionage?

Or Operation Paperclip that shipped the entire German propulsion hivemind to the US? Or CryptoAG that sold compromised comms. to essentially all the world?

Even if America closes off its markets to foreign firms found guilty of copying American IP, they'll simply lose the global market, while their market dominance shrinks further.

It always impresses me how they've been doing it for decades now and it still works. Their strategy is known, people have been writing articles and books about it for a long time now. Yet the corporations keep handing their IP over to them on a silver platter. Greed knows no limits.

It's not necessarily greed (profit motive) itself, but that the decision makers have a short-term value function. They tend to have a "strip it and run" mentality rather than "multi-generational family firm" strategy.

I believe most people would in fact call that greed.

it is absolutely greed as you defined it (profit motive) -- tomorrow never comes, they want their quarterly payoff, and they want it now.

eventually they find executives willing to play that game, and they wring all of the value out of the company until it dies. greed kills companies.

It's the usual driver - competition. If a company refuses to accept the IP loss of selling to China surely, it thinks, one of it's competitors will. That competitor will grow rapidly and can then destroy you in the medium term. So better to be the company that goes to China and survives the medium term existential risk, even if it creates a long term existential risk.

This actually points to some reasons why this might not apply to aviation:

1. ITAR restrictions on some of the tech necessary. You don't need to worry about your competition going to china if the government is making it hard for both of you to go.

2. Oligopoly. There are few aviation companies, so the "surely one of my competitors" and competition generally is weaker than in other sectors.

It's a trade: IP for more sales in China. At this point these companies surely know how it works and are doing it because they think it's the more profitable choice

More sales now, none in the future, though.

Yeah. Seems like the kind of thing that would be solely pushed by executives/decision-makers expecting to get their bonuses and move on before the problems show up.

> and are doing it because they think it's the more profitable choice

Only over a very short window.

It is also thinkable that the Western manufacturer are implementing a "keep your enemies closer" strategy. Complying superficially while closely watching how the technology, uh, transfer is going and subtly messing with it. Either that, or I don't understand how airplanes are particularly hard to learn how to build. The technology is obviously difficult, but there is also a lot of money and staff (and time, given how long China has been trying) to deal with that.

You can assume that the Chinese have complete engineering plans for any target product, including an aircraft.

But having those plans isn't enough to build the plane. You needs lots of unwritten know-how to succeed. This isn't just "tricks of the trade", but also knowing about the materials and processes used, how they can fail, where the failure is introduced, and what the known good "beaten path" for a process is.

If Boeing were to fire all engineering and manufacturing personnel and completely re-staff, how many years would it set them back?

That's why one of the key steps in the China cycle is to get the product built on Chinese soil.

> If Boeing were to fire all engineering and manufacturing personnel and completely re-staff, how many years would it set them back?

With a team of elite MBA-trained managers? Zero years of course! Those guys can do anything.

COMAC's first sale in the Americas was small. It remains to be seen if the footprint will increase.

"...a potential order of up to four C919 planes... Only nine C919s are currently in service since they started commercial operation in May 2023, all with Chinese airlines."

https://www.reuters.com/business/aerospace-defense/brazilian...

It’s too early to judge. Yes the C919s have had some embarrassments (like cabins filled with fog) but I bet they’ll work out the growing pains quickly and learn. New models often have issues - remember the 787 having issues with composites, batteries, etc?

Also, Brazil has agreed to provide consultation and technology sharing between Embraer and Comac. And Embraer is highly competent, with aircraft used in the western world widely, so they’ll help with a lot of the real world issues. This is happening now because of BRICS momentum and Lula (friendly with Xi due to some common ideology). But I think whatever China gains from this new partnership will remain even once it ends. Eventually they’ll make the engines and avionics natively too, it’s only a matter of time.

Meanwhile Boeing has almost no innovation due to a mix of financially focused management, union labor culture, and a brain drain over the last 25 years. They’re not going to increase their lead anytime soon, which means the gap can only reduce.

Engines are a tough cookie to crack since the material science need to do it with high performance and economy is a tightly guarded secret and difficult to reverse engineer. They’ve been dumping billions into this but it’s still a moat (they keep claiming that they have engines ready for high performance/high mileage to overhaul military use, but keep needing to use Russian ones instead).

Well, what doesn't make any sense to me is why COMAC let Bombardier sell Airbus the A220.

That jet has lots of sales, and half ownership with production rights would be fantastic for COMAC.

Canadian government would never allow a Chinese SOE to take over something like the Bombardier C series

Wait a second. Did Bombardier have other offers for the C Series? It's a great plane but the circumstances of the sale are unknown to me. It happened so fast.

As far as I know, they had no other choice. Boeing was rumored to be working with them for a while on an acquisition, but then abandoned them and left them in a very vulnerable position. Smaller companies without lots of working capital cannot absorb a big strategic change like that. They had probably already had discussions with Airbus that made closing it out much quicker than any alternative.

Don't draw conclusions too fast. Airbus breakthrough was when it sold its A300 to eastern airlines. If I remember correctly it was a no strings attached deal where they could give them back.

I hope so. Commoditization should be part of every product’s lifecycle. If the incumbent can’t meet demand then that unmet demand becomes a juicy target. And if it won’t meet demand (or its prices are too high or it raises its prices to match demand to supply) then that price umbrella also creates a juicy target.

In other words, barring legal implications this is the natural order of things.

Simply inventing something should not confer the right to charge as much as one wants for it for eternity, nor the right to produce as much or as little as one wants.

And you also have to have some sympathy for the problems Chinese leadership face - what are they to do, if mind boggling amounts of things must be produced just to keep up with China’s own indistrialization? Wait around for companies to fulfill orders for foreigners and soak up the leftover capacity?

Yes. Airplanes are complex, high value products with military applications. The skill set to successfully develop and field a fleet of planes is an obvious upskilling of labor which will bleed over to other fields. China cares about economic development so they will build planes over and over again until they master it. Aviation firms are one of the few industries which closely protected their trade secrets making knowledge transfers tough.

Wonder if there would be transfer to/from their space industry as well?

I'd kind of expect there would be.

The Chinese cycle will come for everything. Unless the western world goes hard on industrial automation right now it’s game over. That’s because the China cycle is not going to end when their labor gets more expensive because they’re already massively automating their plants and they already manufacture most of the stuff so it’s an easier change to make.

The Chinese had a big advantage in a lot of young cheap labour. But now the population is aging, the wages are going up and the playing field will level out.

They are also having issues with cheap capital. A lot got misallocated into building too many tower blocks and Xi's people don't seem quite as smart as dealing with it as Deng's were.

Deng was weary but willing to play ball. The generations after wanted to get rich as quick as possible, and lost some of that weariness. Xi now has to find ways dial that back without provoking a backlash or tanking the economy.

A lot of capital also fled, aggressively, to N America. There is a reason why housing in Vancouver is so insane...

Funny thing is that it is the Chinese going hard on automation than westerners.

Japan went hard on automation as well, but their efforts were stunted in the late 90s by the rise of cheap labor in China along with their massive property bubble popping. Maybe now is a better time for it with AI tech advances, but I can’t help to see history repeating itself.

It's simple, if you have the supply chains already you have more to gain from automation. And as we know from TPS it's easier to automate processes we know how to master manually first.

Definitely. Reckon it'll take a fair while though.

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