China Large Aircraft Industry Deep Research Report

Publication Date: July 2, 2026
Research Scope: China's commercial narrowbody and widebody aircraft (C919 narrowbody + C929 widebody), primary manufacturer COMAC and its supply chain
Industry Archetype: Technology Hardware / Early Commercialization (Domestic Substitution × Capacity Ramp-up)
Core Conclusion: Bullish outlook (medium conviction), but supply chain returns are sharply bifurcated—engine and high-end materials segments generate real profits, while airframe manufacturing broadly suffers "revenue growth without profit growth"; investment requires strict stock selection

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I1. Industry Definition and Boundaries

Research Subject: China's large aircraft industry, encompassing the C919 (150-190 seat narrowbody mainline aircraft) and C929 (280-320 seat widebody long-range aircraft) developed under COMAC's leadership, along with the associated supply chain ecosystem.

Industry Chain Map: Upstream (raw materials/components) → Midstream (airframe structures/engines/avionics systems/final assembly integration) → Downstream (airline operations/MRO maintenance). Core segments include: Engines (CFM LEAP-1C imported / CJ-1000A domestic substitution in progress), Airframe Structures (AVIC Xi'an Aircraft, Shenyang Aircraft, Chengdu Aircraft, Hongdu), Avionics Systems (AVIC Avionics/AVIC Optoelectronics + foreign JV partners), Final Assembly Integration (COMAC).

Competitive Boundary: The C919 competes against the Airbus A320neo family and Boeing 737 MAX series, targeting the Chinese and "Belt and Road" narrowbody markets; the C929 targets the Airbus A350/Boeing 787, addressing the international long-range widebody market. Currently (mid-2026), the industry remains in early commercialization: C919 cumulative deliveries stand at approximately 38 aircraft, with orders in hand exceeding 1,000 units; capacity ramp-up is the core constraint.

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I2. Demand: Structural Domestic Substitution, Trillion-Level TAM

2.1 End-Market Demand Drivers: China's Aviation Market Growing at the World's Fastest Rate

China is the world's second-largest single aviation market, with 2025 civil aviation passenger traffic reaching 770 million person-trips (CAAC 2025 Statistical Bulletin), and RPK (Revenue Passenger Kilometers) of approximately 1.4 trillion passenger-kilometers. COMAC's Market Forecast Annual Report (2025-2044) projects China's RPK long-term CAGR at 5.3%, broadly consistent with Boeing's CMO forecast.

Per-capita flight frequency is only 0.55 trips (2025), versus 2.6 in the US and 1.0 in Japan, indicating substantial penetration headroom. Boeing's CMO projects China's middle-class household share will rise from 24% in 2025 to 43% by 2044, providing structural support for air travel demand.

• Domestic Routes: 2025 domestic passenger volume reached 690 million, +3.9% YoY (CAAC). Domestic routes constitute the dominant narrowbody market.
• International Routes: 2025 international passenger volume reached 79.7 million, +21.6% YoY, exceeding 2019 levels. Visa-free policy expansion and denser route networks (987 international routes) drive sustained international travel growth.
• Cargo: 2025 cargo and mail volume reached 10.17 million tonnes, +13.3% YoY (driven by cross-border e-commerce), with freighter demand growing by 22 aircraft annually.

2.2 Demand Bridge: 2025→2035 Bottom-Up Decomposition

Using China's civil aviation fleet of 4,574 aircraft at end-2025 (3,525 narrowbody + 466 widebody + 293 regional + 290 freighter) as the base year, projections to 2035 are as follows:

Of which narrowbody new deliveries ≈3,111 aircraft (including C919 substitution headroom), based on COMAC's 20-year forecast of 7,250 narrowbody aircraft needed in China with the first 10 years accounting for ~43%.

COMAC forecasts China will need 9,856 new aircraft over the next 20 years, valued at approximately $1.48 trillion (≈RMB 10.7 trillion), including 7,250 narrowbody (74%) and 1,621 widebody (16%), constituting the ultimate TAM for the C919/C929.

2.3 Domestic Substitution Penetration Path (Structural Inflection Point)

C919 penetration of China's new narrowbody deliveries starts from a minimal base:

Note: Capacity paths have been revised downward per red-team critique—COMAC's 2025 target of 75 aircraft was met with only 15 (20% achievement rate); Q1 2026 annualized at only 12 aircraft. Any capacity forecast must be anchored to this historical execution record. The baseline path in this table corresponds to annual capacity growing from 28 aircraft (2026) → 70 (2027) → 120 (2030) → 190 (2035), below COMAC's official targets of "150 aircraft by 2027 / 200 by 2029."

Inflection Point Assessment: The structural inflection point for C919 domestic substitution lies not in "whether demand exists" (demand certainty is high), but in "whether supply can be unlocked." Current orders exceed 1,000 aircraft versus annual deliveries of 15-28, implying an order-to-delivery ratio of approximately 35-65x. The true inflection point arrives when capacity breaks through 50 aircraft/year (expected 2027-2028)—at which point the C919 transitions from a "political mandate" to an industry generating meaningful scale revenue.

2.4 Demand-Side Risks

• Shift in airline true preferences: At end-2025, Chinese airlines placed orders for 148 narrowbody aircraft with Airbus (not C919), indicating that airlines still prioritize mature aircraft types in commercial operations; willingness for domestic substitution does not equal action.
• Excessive share of orders from financial leasing companies: Approximately 600 orders come from leasing companies (policy-driven), while actual airline confirmed order intake remains conservative (China Eastern plans only 10/10/15 aircraft introductions in 2026-28 respectively).

Sources: CAAC 2025 Civil Aviation Industry Development Statistical Bulletin, COMAC Market Forecast Annual Report (2025-2044), Boeing CMO 2025-2044, IBA COMAC Aircraft Programmes Status & Outlook

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I3. Supply: Capacity Ramp-up—Planning Ambition vs Execution Reality

3.1 C919 Capacity Ramp-up Path

Historical Delivery Record: 3 aircraft in 2023 → 12 in 2024 → 15 in 2025 (target 75, 20% achievement rate). Q1 2026 delivered only 3 aircraft (annualized 12), with a full-year target of 28.

Final Assembly Line Layout:

Capacity Ramp-up Path (Red-Team Adjusted): 15 aircraft delivered in 2025 (31% utilization) → 2026 target 28 (Q1 only 3, challenging to achieve) → Lingang Phase II partially operational 2027, delivering 50-70 → 90-120 in 2029 → 120-150 in 2030.

Core Constraints: ①Engine supply is the capacity ceiling—LEAP-1C relies entirely on US export licenses (suspended for 2 months in May-July 2025); CJ-1000A substitution still requires 2-3 years; ②Avionics/flight control localization rate is only ~38% (COMAC announced overall aircraft localization rate of 59% in April 2026, but avionics and flight controls remain heavily dependent on JVs); ③COMAC has never met its capacity targets historically (2025 target 75→15), and an execution discount should be applied.

3.2 Engines: CJ-1000A—The "About-to-Be-Lifted" Bottleneck

The domestic CJ-1000A engine is the linchpin of C919 supply chain self-sufficiency:

Red-Team Ruling: The multi-party argument that "CJ-1000A will achieve batch substitution in 2027" is overly optimistic. Certification has already been delayed from end-2025; from installation validation to batch production typically requires 2-3 years (airworthiness authorities require route validation + production license certification); single-crystal turbine blade lifespan still lags imports (imports >20,000 hours). This report's baseline assumption: CJ-1000A receives TC in Q2-Q3 2026, small-batch installation validation in 2027, and meaningful batch substitution in 2028-2029. Engines account for only ~28% of total aircraft cost; a 14-15% engine cost reduction contributes only ~4% to the overall aircraft.

3.3 C929 Widebody Progress

The C929 is in the detailed design phase (wind tunnel testing initiated February 2026), with 280-320 seats, 12,000 km range, and composite material share >50%. Target TC in 2032, with first deliveries in 2033. It will be equipped with the domestic CJ-2000A engine (35-tonne thrust class; core module has completed high-pressure compressor testing). The C929's primary supply chain pull is in avionics localization leapfrogging (adopting the fully autonomous "Tianmai" avionics system).

3.4 Supply-Side Risks

• LEAP-1C supply disruption recurrence (suspended for 2 months in 2025); a single interruption could push annual deliveries back to 15 aircraft levels
• CJ-1000A certification delays (already slipped once); if batch production is not achieved by 2027, the capacity ceiling remains at the 50 aircraft/year level
• Lingang Phase II/Chengdu production line construction delays; final assembly line commissioning and capacity ramp-up are distinct concepts—having a production line does not equal having capacity

Sources: 21st Century Business Herald, South China Morning Post, IBA COMAC Outlook, Reuters (EASA certification coverage), Ringier Industrial Resources (CJ-1000A coverage)

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I4. Supply-Demand Balance and Pricing: Severe Supply Shortage, Pricing Power with the Manufacturer but Unrealizable

4.1 Supply-Demand Gap (C919 Narrowbody)

Nature of the gap: It is not insufficient demand, but supply fundamentally unable to keep pace. With 1,005 confirmed + 120 intended orders in hand, at 28 aircraft/year in 2026, the backlog covers approximately 36 years.

4.2 Pricing Framework

The C919 adopts the aviation industry standard "list price-discount" model:

• List Price: Basic version $99 million (China Eastern, 100 aircraft, 2023); extended-range version $108 million (Air China, 100 aircraft, 2024)
• Actual Transaction Price: Airlines state "actual prices are significantly below list prices." Based on industry convention of 15-30% discounts for large orders, estimated actual ASP is approximately $70-84 million (≈RMB 5.0-6.0 billion per aircraft)
• Competitive Comparison: A320neo list price ~$111 million (actual transaction discount 40-50%, approximately $55-67 million); 737 MAX 8 list price ~$117 million (actual transaction $47-70 million)

Key Finding: The C919's list price is ~11% lower than the A320neo, but because A320neo/737MAX discounts are deeper (40-60% vs C919's 15-30%), the C919's actual transaction price may be equal to or slightly higher than competitors—indicating the C919 does not compete on price but is driven by policy orders and domestic substitution logic. This is both an advantage (no price war needed) and a risk (if policy support weakens, airlines may shift to cheaper mature aircraft types).

4.3 ASP Trajectory (Next 12 Months)

Pricing Framework: List price ($99-108M) × (1 - discount rate 15-25%). The discount rate trend is the core variable—narrowing from the high discounts (~25-30%) of the 2025 initial customer development phase to 15-20% by 2027, but the pace of narrowing depends on capacity delivery and accumulated operational data.

4.4 Break-Even Analysis

Aerospace manufacturing learning curves are typically 80-85% (cost declines 15-20% per doubling of production). From 15 aircraft in 2025 to 85 in 2028 (2.5x production increase), unit manufacturing costs are expected to decline 25-35%.

Sources: China Eastern announcement (2023-09-28), Air China announcement (2024-04-26), IBA COMAC Outlook, Oriental Fortune Securities research report

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I5. Competitive Landscape and Profit Pool: Domestic Substitution Player in the Duopoly's Interstice

5.1 Global Narrowbody Competitive Landscape

• Airbus (58% share): A320neo family delivered ~607 aircraft in 2025, capacity ~60/month, backlog ~7,000 aircraft. Advantage lies in the A321neo (200+ seats), which has virtually no competitor.
• Boeing (40% share): 737 MAX delivered ~440 aircraft in 2025, capacity ~38/month. Recovering after safety incidents, targeting 50+/month capacity.
• COMAC (<2% share): 15 aircraft delivered in 2025. In capacity ramp-up phase, protected by policy-mandated procurement in China, but near-zero global market presence.

The global narrowbody market is monopolized by the Airbus-Boeing duopoly (~98% combined), and the C919 is entering an extremely high-barrier mature market. However, the biggest variable is that China accounts for ~20% of global narrowbody demand, and Chinese airlines are being policy-guided toward domestic alternatives—making it possible for the C919 to achieve breakthrough in the domestic market first.

5.2 Industry Chain Profit Pool: Who's Making Money, Who's "Drinking the Broth"?

Profit Pool Tiers:

5.3 Key Player Profiles

5.4 Profit Migration Direction (Next 3-5 Years)

1. Engines: Profit shifting from CFM (US-French JV) → AECC Commercial Aircraft Engine (CJ-1000A), but the pace depends on domestic engine reliability and economics
2. Avionics Systems: Profit shifting from JV foreign partners (Honeywell/GE/Thales) → AVIC Avionics and other domestic substitutes; the segment with the greatest value uplift potential
3. Primary Manufacturer: As COMAC ramps to 100+ aircraft/year, fixed cost dilution should turn gross margin from negative to positive

5.5 Bargaining Power Upstream and Downstream

• Upstream: COMAC holds extremely strong bargaining power over domestic suppliers (AVIC XAC, Hongdu, etc.) — it is their sole customer, which suppresses supplier profit margins (XAC's gross margin is only 6.4%). Bargaining power over foreign suppliers (CFM, Honeywell, etc.) is extremely weak — due to technology lock-in plus geopolitical risks.
• Downstream: The three major airlines (Air China/China Eastern/China Southern, representing ~60% of China's fleet) are policy-guided to purchase the C919, but a "shift in airlines' true preferences" has emerged — in late 2025, they placed orders for 148 Airbus A320neo aircraft rather than the C919.

Return Quality Conclusion: The overall return quality of China's large aircraft supply chain is currently Poor. Only the engine, high-end materials, and connector segments generate real profits (high and sustainable ROIC). Airframe structure manufacturing is a classic "revenue growth without profit growth" value trap, while COMAC itself is in a "burning cash for capacity" phase. Supply chain profits are concentrating in high-barrier segments with high localization rates — a trend expected to persist over the next 5-10 years.

Sources: Company 2025 annual reports, FlightGlobal, IBA COMAC Outlook, ABC Securities/ Everbright Securities/ Dongguan Securities research reports

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I6. Policy · Geopolitics · ESG

6.1 Domestic Policy: Unprecedented Support

Net Direction: Extremely positive domestic policy — national strategic positioning + RMB 44 billion capital injection + locked-in orders for over 1,000 aircraft constitute assured support for capacity ramp-up.

6.2 International Airworthiness Certification: A Long Road Ahead

"Rural areas surrounding the cities" strategy: Brunei recognized CAAC certification in October 2025, and China is promoting bilateral airworthiness mutual recognition with multiple ASEAN countries (Vietnam, Laos, Indonesia, Cambodia, etc.) to open export channels for the C919 in emerging markets.

6.3 US-China Technology Rivalry: Biggest Supply-Side Downside Risk

• LEAP-1C Export License: Suspended for 2 months from May-July 2025 → directly resulted in only 15 aircraft delivered that year (target: 75). The engine could once again become a bargaining chip at any time.
• 1260H List: In June 2026, AVIC and its subsidiaries were added to the US DoD CMC list (188 entities). Although COMAC itself is not on the list, it creates associated compliance risks.
• Trend Assessment: US-China technology rivalry is structurally intensifying; self-reliance in engines and avionics is the only hedge.

6.4 ESG/Carbon

The C919 is powered by the LEAP-1C (same family as A320neo/737MAX), with carbon emissions approximately 15% lower than the previous-generation CFM56, on par with competitors. The first commercial flight using SAF (Sustainable Aviation Fuel) was completed in 2024 with no compatibility issues. The CJ-1000A's NOx emissions are 20% lower than CAEP6 standards, and noise meets Stage 4 requirements. ESG/carbon does not constitute a barrier to differentiated competition.

Net Direction: Slightly bullish. Extremely positive domestic policy > geopolitical headwinds. Key tracking indicators: ①EASA certification progress at each stage; ②LEAP-1C export license status; ③CJ-1000A certification timing.

Sources: 15th Five-Year Plan Outline (NDRC), 21st Century Business Herald (COMAC capital increase), Reuters (EASA coverage), Observer (LEAP-1C suspension coverage), US DoD Federal Register

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I7. Core Debates and Scenarios

Debate 1: Can the Capacity Ramp-Up Be Delivered?

Red Team Ruling: accepted. Capacity forecasts have been significantly revised down from COMAC's official targets: 2027 from 150 → 50-70 aircraft, 2029 from 200 → 90-120 aircraft. However, even the adjusted conservative path requires regular delivery data for validation.

Debate 2: Can the CJ-1000A Resolve the Engine Bottleneck in Time?

Red Team Ruling: accepted. The baseline scenario pushes meaningful mass replacement of the CJ-1000A from 2027 to 2028-2029.

Debate 3: Can the Domestic Market Alone Support COMAC's Profitability?

Red Team Ruling: partially accepted. The "third global pole" narrative is overly ambitious; revised to "third pole in the domestic narrowbody market; third global pole no earlier than 2035+." The C919 has genuine share potential in the Chinese market, but domestic airlines' commercial preferences remain a variable.

Scenario Analysis

Catalyst Calendar (July 2026 → June 2027)

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I8. Investment Implications and Beneficiary Targets

8.1 Prosperity Direction × Business Quality Decision Matrix

Matrix Interpretation:

• Upper-right quadrant (Core allocation): AVIC High-Tech, AVIC Optronics — upward prosperity and good returns. High barriers + high margins + multi-track reuse; these are the segments that truly "eat meat" in the supply chain.
• Lower-right quadrant (Value trap ⚠️): AVIC XAC, Hongdu Aviation — bullish prosperity direction but extremely poor returns. C919 volume growth ≠ earnings growth: AVIC XAC's 2025 revenue -5.1% YoY, operating cash flow -RMB 8.35 billion; Hongdu Aviation revenue +42% but gross margin only 2.95%. "Volume growth without profit growth" is the core risk.
• Upper-left quadrant (Turnaround candidates): Segments with currently good returns but uncertain prosperity (no typical targets in this industry).
• Lower-left quadrant (Avoid): Declining prosperity + poor returns.

Core Investment Lesson: In the large aircraft supply chain, "bullish on prosperity" absolutely does not equal "worth buying" — airframe structure manufacturing is a textbook value trap: national will drives → revenue growth → but gross margins suppressed to single digits by the sole customer (COMAC) → negative operating cash flow → revenue growth without profit growth.

8.2 Beneficiary/Avoid Targets

✅ Beneficiary Targets (ranked by logic strength):

❌ Avoid Targets:

8.3 Key Industry-Level Risks

1. Capacity execution risk (biggest risk): COMAC's historical capacity target achievement rate is only 20% (2025); Q1 2026 annualized rate is only 12 aircraft. If full-year 2026 deliveries fall below 25 aircraft, supply chain earnings will face broad pressure.
2. Engine supply disruption risk: LEAP-1C is subject to US export license controls; suspended for 2 months in 2025. If disrupted again before CJ-1000A reaches mass production, C919 deliveries will again fall to the 15-aircraft level.
3. Shift in airlines' true preferences: Airlines chose 148 Airbus aircraft over the C919 in late 2025, indicating policy procurement ≠ commercial preference. If more airlines still choose foreign aircraft despite policy pressure, the ceiling for domestic substitution share will be compressed.
4. Revenue growth without profit growth in the supply chain: AVIC XAC/Hongdu Aviation have already proven — C919 volume growth does not necessarily translate into supplier profits. Investors must strictly distinguish between "order growth" and "earnings growth."

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Disclaimer: This report is prepared based on public information and industry research frameworks and does not constitute investment advice. Key variables such as actual C919/C929 deliveries, CJ-1000A certification timing, and EASA/FAA certification progress are subject to significant uncertainty. Investors should make independent judgments and bear corresponding risks.