- Will MC-21's entry as the medium range commercial aircraft redefine Russia’s role in the sector?
- MC-21 and its challenges
- Airbus and Boeing vs. MC-21?
Russian aircraft industry is one of the most innovative in the world, the aviation manufacturing in Russia has a century old legacy. But, the dissolution of the USSR impacted the development of new aircraft, this fell in relation to the West in modern Russia. The USSR era aircraft are still produced in the nation and include the TU-204 and II-96. These are commercially unviable and technologically obsolete. Thus, this led to an increasing dependence on aircraft and parts produced elsewhere for the domestic airlines. Hence, Russia incorporated the UAC [(United Aircraft Corporation) in 2006] for the aviation manufacturing industry with a broader vision to substitute its imports and reduce the growing reliance on foreign state actors. The corporation along with 30 constituent enterprises seek to design and produce aircraft under its brand names such as Sukhoi, MiG, Tu, Yak, Beriev, SSJ 100 and MS/MC-21 for civil and military aviation, at the same time integrate the best technology and industry practices.
The current blog discuss the UAC's forthcoming commercial aircraft MC-21's entry into the medium range-narrow body commercial aircraft segment and examines the outlook of the firm.
The medium range-narrow body aircraft are characterised with a seating capacity of 100-200 or more passengers and their distance range is of 3,000-6,000 kilometres. This segment generates the majority of revenue and the highest margins for aircraft manufacturers around the world.
UAC is establishing itself as a prominent global aircraft manufacturer, it made headlines with the Sukhoi Super Jet 100 launch in the past decade and currently, it aims to spearhead the medium range commercial aircraft industry with the MC-21 brand.
The UAC is slated to begin delivery of aircraft from 2019. In addition, on paper, the aircraft’s specification and features make it one of the best in this segment both domestically and internationally. The aircraft include latest aircraft engineering, while comprising composite wings, enlarged body diameter, and most advanced engines and systems. These provide several competitive advantages for airliners and translates into reduced airline costs, more comfortable travel, reduced in transit service time at airports and compliance with the future environmental standards. MC-21 also claim to reduce direct operating costs (12-15%), which is lower than its foreign competitors. The same has been asserted by the UAC.
Furthermore, the contemporary line-up of the prominent firms producing aircraft in this segment are Airbus (France), Boeing (the USA), Bombardier (Canada) and Embraer (Brazil). This space is dominated by Airbus and Boeing with a market share of approx. 97%. A comparative analysis on the production levels (UAC vs. Airbus and Boeing) in the commercial aircraft segment showed that Airbus and Boeing produce on an average 2 units of A320s and 737s per day at present levels. This is expected to increase by 2020 as UAC aim to produce twenty MC-21 aircraft per annum by the stipulated year. Further, this is anticipated to rise to 70 aircraft by 2033, which translates to 6 aircraft per month on an average. Hence, this is way lower than the present scale maintained by both the Airbus and Boeing.
It is important to realise that Airbus and Boeing have established a strong foothold in the aviation industry and especially, in the segment, this makes it very difficult for other companies to compete in the sector. The clientele of these two entities are international and are not merely restricted to a country, whereas for the players like UAC the presence is regional. Currently, the orders for MC-21 are received from Ilyushin Finance Co. (IFC), VEB-Leasing and Rostac, all these are domestic state-owned airlines in Russia. Additionally, even the regional airline players showed muted response to the MC-21, thereby, UAC has a long way to go before it begins successful commercial operations in the segment.
According to the Airbus growth forecast on the global commercial aircraft market, the medium (2026) and long term (2036) demand for single aisle aircraft will be 14,030 and 34,170 aircraft respectively. A major proportion of this demand is expected from Asia-Pacific followed by Europe and North America. Addedly, 75% of the passenger aircraft demanded globally would be for the replacement of existing fleet, whereas 25% is anticipated for new aircraft.
Broadly, as far as global commercial aircraft demand is concerned, UAC plan to achieve the market share of 4.5% by 2025 and maintain this up to 2035. Hence, a 4.5% global market share will translate to roughly 632 (2025) and 1,538 aircraft (2035). But, it is yet to be seen that UAC will be in a position to attract the same level of demand through MC-21. The MC-21 is a superior aircraft by present standards. Meanwhile, the company is building the necessary infrastructure to provide maintenance services, customer support and spare parts to airlines throughout the world. Technically, the operational efficiency of an aircraft depends on several factors such as maintenance, ground staff, the region of operation, age of the aircraft, etc. Therefore, the actual efficiency of MC-21 will be measured once it becomes operational and then a range of parameters will be established to compare the aircraft with peers.
MC-21 faces two significant issues despite all claims of product superiority. Firstly, Russia’s political relationship with other nations and secondly, UAC’s production capacity. Russia mostly had hostile political relations with major countries in the West. Especially, following the Ukrainian crisis in 2014, the US, Europe and 40 major nations placed economic sanctions on Russia, this might deter MC-21’ acceptability in these countries. Although, on a positive note, the global demand data by the Airbus shows that the CIS (Commonwealth Independent States) area will generate 4% of the global commercial aircraft demand by 2035, Russia has a strong footing in the region. This is extremely close to the medium-term and long-term goals of the UAC. Moreover, UAC would be required to deliver 105 commercial aircraft per year from 2019 and 154 commercial aircraft per annum from 2026 onwards, from its current combined capacity of 65-80 aircraft in all its segments delivered per year if it proposes to fulfil the anticipated demand. Therefore, MC-21 might witness demand from the domestic market, CIS region and from countries which have good political ties with Russia. But the demand levels are likely to fall short of UAC’s expectations as the company may face capacity constraints. Consequently, in future, the MC-21 will be competing with the modern versions of A320 and 737 aircraft, the Chinese C919 and the Canadian Bombardier C series. Thus, in real terms, operational capability, acceptability and efficiency will be defined over a period of time.