WHEN China's first home-grown regional jet takes off from Shanghai in five years it will carry the dreams of its builders tempered with the turbulence of an intensely competitive industry that has been pushing top international aircraft makers out of the game in recent years.

The ARJ21 is being developed because China will need hundreds of small regional jets of 100 seats or fewer to serve the burgeoning domestic air travel market over the next two decades and does not want to have to import them all. There are 50 new airports scheduled for construction over the next five years and feeder traffic from regional jets is forecast to grow by 12 per cent annually in China over the next 20 years.

The ARJ21 will carry 60 to 90 seats in a five-abreast configuration. Components will be built in several cities by member companies of China Aviation Industry Corp (AVIC) I, and then assembled here by Shanghai Aviation Industrial (Group) Corp. The company puts preliminary studies and research costs at 5 billion yuan (US$602 million) while international observers put development costs at US$900 million.

China had tried and failed to launch joint-venture efforts to develop new regional jets with Airbus and Daimler-Benz. This time it is moving ahead alone and holds the intellectual property rights of the design.

Yet it needs an international supplier base, which had to be convinced that the project is likely to succeed this time. GE Aircraft Engines will supply the power, airframe design is said to come from Antonov in Russia and the interiors and avionics will also come from overseas.

Breaking dominance

"China is good at building the airframe and the skin, but it will need international help with things like engines, the avionics and flight control software, which is dominated by a few multinationals," said Philip Butterworth-Hayes, editor of the authoritative Jane's Aircraft Component Manufacturers.

The company forecasts demand for 500 ARJs over the coming two decades. Along with China, the builders expect exports to parts of Asia, Africa and South America, according to Zhou Baogui, director of the company's ARJ21 Project Office.

While Zhou called the regional jet a "milestone" in Chinese aircraft manufacturing, it faces a tough market. Fairchild Dornier has gone bankrupt despite holding the beautifully engineered 728 regional jet, proving companies can't survive on technical merit alone. Also exiting the business of developing regional jets is Saab and British Aerospace.

"The regional jet market is strongly dominated by Embraer of Brazil and Bombardier of Canada. The ARJ21's building must work very hard to earn market share," says Butterworth-Hayes in an interview from London.

Other international observers were tougher. "What is so good about running third in a field dominated by two very good players," asked one foreign aircraft consultant following the ARJ21 development.

"Gone are the days when Chinese airlines can be told to buy this model, so it has to be a good product," he added. "And the big aircraft leasing companies won't want to take a new, unproven aircraft."

Bold tests

Yet China is going after the sweet spot in the jet market with this project. China's airlines will add 1,459 new airplanes by 2020 to serve domestic markets, including Hong Kong and Macao, according to a new study by Boeing. Regional jets and single-aisle airplanes will account for 78 per cent of the airplanes serving the domestic market.

China has been pushing on several fronts to build smaller jets. While AVAC I is building the ARJ21, its cousin AVAC II recently signed an agreement with Embraer to jointly produce 30-to-50-seat regional jets in Harbin. Production begins by the end of next year.

Not to be outdone, senior Canadian government officials have said Bombardier has also been in talks to build its regional jets in China. Bombardier Regional Vice President for Asia John Cheh declined comment when contacted by the Shanghai Star this week.

To Butterworth-Hayes of Jane's, the key for the ARJ21's developers is to get the size right.

"I would think that building something with 40 to 60 seats would be a better place to start for the ARJ21," he said. "It would be simpler and cheaper to build and allow the company to go after the corporate jet market.

"China should start with something not too complex. Just follow Embraer's development. The Brazilians have shown what it is possible for a developing country to do. Now they are even going against Airbus in some market segments."

Other international analysts say the real test for the ARJ21 is not simply the aircraft design, but what the builders can offer customers after it rolls off the assembly line. "China can build the ARJ21, but developing it into a commercial success will be the trick," said one foreign analyst, who asked not to be named. "The key will be in the system integration, which is the customer service and after-sales support. Without that, selling the ARJ21 will be tough."