IMPACTS OF CHINA’S ENTRY ON THE PRODUCT LINE RIVALRY IN THE GLOBAL CIVIL AIRCRAFT INDUSTRY

As international tourism continues to flourish and airlines are eager to expand their fleets, the demand for civil aircraft has continues to grow in the global market. The market has been a duopolistic one, shared by Boeing and Airbus. However, the recent entry of the Chinese company, Comac, had the potential to turn it into a triopoly within certain segment of the product line. This observation motivates the research objective to analyze the impact of Comac's entry on the production strategies of the incumbents. Specifically, this dissertation studies the impact on each firm’s allocation of production capacity toward different civil aircraft in the product line in response to how Comac’s entry, which can also impact the effects of capacity increase and market expansion on the product line rivalry. This dissertation is based on a multi-product, oligopolistic model of Boeing and Airbus. To provide insights on the strategy and behavior of each firm in the evolving competitive environment, this dissertation solves and extends the mathematical model to incorporate Comac as the entrant and compares model results with data of orders and deliveries of the three companies in the past 15 years. This model finds that when Comac's C919, a relatively small plane, enters the global civil aircraft market, Boeing and Airbus will increase the production of their small planes and decrease the production of the relatively large planes under the production capacity constraints. If the production capacity increases, both Boeing and Airbus will produce more planes, but will allocate more additional capacity to large planes than to small planes compared to the duopolistic competitive environment. When the market demand increases, despite the entry of the C919, Boeing and Airbus iv will continue to increase the production of both large and small planes, but the response is greater to an increase of demand for large planes than that for small planes. The orders and deliveries data provide some but insufficient support for the model predictions. As the market participation of Comac continues to grow, future researchers can re-assess the models’ propositions with more available data.