Indonesian Crash Highlights Rise Of Non-Traditional Aircraft Makers
The crash of a Sukhoi Superjet 100 with 47 people on board during bad weather in Indonesia is a tragedy that will deal a heavy blow to the Russian plane-maker's hopes of becoming a major player in the commercial transport market. Russian airliners do not have a good track record for safety or creature comforts, but by teaming with Italian aerospace giant Finmeccanica, Sukhoi had hoped to improve its image. Its Superjet 100 is a narrowbody (single-aisle) transport seating up to 100 passengers that straddles the threshold between regional jets and small commercial transports such as the Boeing 737 and Airbus A320. The Jakarta Post reports today that four Indonesian carriers were considering purchase of the Sukhoi plane prior to this week's accident.
The fact that a non-traditional supplier such as Sukhoi was making inroads in the rapidly-growing Indonesian market highlights the fact that the commercial transport sector is becoming increasingly crowded with new entrants. There was a time not so long ago when Boeing and Airbus seemed to be the only companies that mattered in the business, but now companies like Sukhoi, Brazil's Embraer, and Canada's Bombardier are entering the low end of the market -- with China promising to be there soon too. The traditional players thus cannot take their market dominance for granted anymore, and it would be a miracle if they can sustain the margins they are currently generating in narrowbody transports through the end of the decade. Judging from the history of Airbus, this is not a market where Boeing can try to position itself as the BMW of narrowbodies while everyone else is content to be Hyundai; once the upstarts have established a toehold in the commercial transport sector, they will begin moving up-market.
This unfolding story has important implications for the compromise the House of Representatives reached this week in extending the authority of the U.S. Export-Import Bank. That compromise requires the federal government to enter into negotiations with other nations on eliminating government financing of commercial transport exports. Some free marketeers view such financing as a market distortion, even though Ex-Im Bank increasingly uses its lending authority to level rather than upend the playing field for U.S. exporters. But the important point is that it is not enough to win European support for ending such financial arrangements. Brazil, Canada, China and other countries that are homes to emerging makers of commercial transports must also sign on to any pledge concerning how airliner exports will be financed. They aren't party to existing agreements limiting government financing, but if they aren't brought into future pacts, they will wipe out the traditional suppliers with low-rate financing that carriers in places like Indonesia can't ignore.
