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Competition in the Skies: China’s Aviation Industry and the Ethiopian Airlines Crash

Apr 16, 2019
  • Mikaila Smith

    J.D. Candidate at the University of Chicago Law School

Last month’s tragic Ethiopian Airlines crash — resulting in the deaths of all 157 people on board—prompted international mourning, as well as comparisons to the October 2018 Lion Air crash in Indonesia. Both accidents involved the same aircraft: Boeing’s new 737 Max 8. As government and regulator investigations continue, discourse around these accidents includes analysis of China’s growing prominence in the global aviation industry.   

China was the first nation to respond to the Ethiopian Airlines crash by grounding all of the Max 8 aircraft operating in China (an estimated 96 models). It is rare, though not without precedent, for governments to respond to aviation accidents by summarily grounding all other models. This marked the first time that China took the lead in responding to an aviation accident. Many other nations including Ethiopia quickly followed suit. 

By contrast, the Trump administration delayed grounding the Max 8 in what has been criticized as a ‘wait and see’ strategy. Currently, there are 54 of these aircraft in the U.S. operated by just two airlines: American and Southwest. There was significant pressure in the U.S. to ground the Max 8, including petitions from at least four senators (both Democrats and Republicans) and statements by travelers’ rights groups and flight attendant unions. 

President Trump initially expressed confidence in Boeing and the 737 Max 8. President Trump’s statement reportedly came after he spoke by telephone with the chief executive of Boeing. His reluctance to ground the Max 8 prompted criticism of the president’s relationships with Boeing executives and the millions of dollars Boeing has spent in the last few years to lobby policy-makers in DC.  

The 737 is the world’s best-selling airliner and the Max is the latest model, featuring a more fuel-efficient engine. The Max is crucial to Boeing’s business development strategy as it seeks to compete with European rival Airbus, and constitutes approximately 90% of Boeing’s estimated 737 deliveries in 2019. So far there are approximately 5,000 orders on the Max 8, with just 350 delivered since May 2017; the Max 8 is massively important to Boeing’s continued growth and success. 

While analysts do not expect investigation results to point to the 737 Max 8 as a fundamentally defective aircraft, the importance of this model means the investigation outcomes are high stakes — both for Boeing and for the global aviation industry. 

China is expected to surpass the U.S. as the world’s largest aviation market within the next three years. China currently builds over eight airports every year, and is projected to require 7,000 new commercial planes in the next two decades—worth an estimated $1.2 trillion. As China’s domestic and international aviation industry grows, competition in the airline industry will continue to build. 

There are concerns that a more aggressive aviation market and additional pressure on sector stakeholders compete with rivals will lead to safety shortcuts. Some analysts say this was a factor with the Ethiopian Airlines and Lion Air accidents: Boeing’s desire to market the Max 8 as a plane that did not require extra pilot certification or training—so as to compete with rival Airbus’ new A320neo aircraft—led to insufficient flight manuals and poor pilot training. 

An anonymous report filed by a pilot through a federal database reportedly called the Max 8’s flight manual ‘criminally insufficient’. Evidence from the Lion Air crash seems to suggest that the pilot was never informed about or trained on the anti-stall system operating in Max 8 planes, and that the pilots’ inability to override this system could have caused both the March 2019 and October 2018 accidents. This article provides a more in-depth explanation of the software malfunction. 

Evidence from the investigation thus far indicates that both Boeing and the Federal Aviation Administration (FAA) were previously aware of the software system issue, but that the necessary software fix was delayed — in part due to ongoing negotiations with regulators about the necessary scope of the patch. After last month’s crash the FAA has announced that pilots will now be required to complete 21-hours of training and additional flight simulator practice before flying the 737 MAX 8. 

The mounting challenges for Boeing are an interesting addition to ongoing tensions between China and the U.S., especially as China’s aspirations of producing its own aircraft—part of the ‘Made in China 2025’ strategy—seem closer to being realized than ever before. China’s strategic goals include capturing 10% of the domestic market with domestically produced commercial aircraft, and 10-20% of the international market. China also hopes to become a significant producer of general-purpose aircraft and helicopters. 

The South China Morning Post reports that since the beginning of the ‘trade war’, state-owned enterprises and media have been instructed to avoid bragging about China’s technological advancements, especially in the aviation sector, so as to avoid escalating tensions. However, critics say that China will be reliant on foreign aircraft for a while yet, as China’s most promising model — the C919 developed by state-owned Commercial Aircraft Corporation of China (COMAC) — faces certification tests and may require design updates to meet high safety standards. 

Despite delays in bringing the C919 to market, China has achieved a lot in becoming one of just eight nations worldwide to successfully develop large airliners. And in the meantime, China appears happy to forge stronger ties with foreign producers: both Boeing and Airbus have begun building jets in China as of last year. 

The aviation industry is an important facet of China’s incredible growth. Continued urbanization and a rapidly increasing middle class have dramatically increased demand for air travel. China has nine of the world’s 50 busiest airports, and the number of passengers on both domestic and international routes has surged in the last two decades. China’s emergence as the world’s largest aviation market will have far-reaching ramifications, both domestically and internationally. 

More than 70% of China’s airline market is state-owned, a rarity among the world’s major airline carriers. The three biggest airlines currently receive generous government subsidies, and there are concerns that this support will lead to lower-than-market-price tickets. There are also questions about how the aviation industry will interact with other state policy initiatives, such as the incoming social credit system. 

It is not yet clear how these dynamics will play out in China’s aviation market. It is clear, however, that China’s aviation market will continue to merit analysis and close attention. Within this growth context — especially considering China’s efforts to someday compete with the likes of Boeing and Airbus — the aftermath of the Ethiopian Airlines accident and the investigation results could have significant ramifications for the international aviation industry. 

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