* Big growth seen in short-haul routes in Asia
* Asian aerospace firms aim to compete with Bombardier,
Embraer
* But small plane makers find headwinds over safety concerns
By Siva Govindasamy
SINGAPORE, March 29 (Reuters) - Indonesia is about to roll
out its first passenger plane, one of several smaller, homegrown
aircraft being studied in Asia, designed especially for short
hops across the region's emerging markets, where air travel is
booming.
State-owned aerospace firm PT Dirgantara Indonesia's 19-seat
N219, which cost $400 million and took just over five years to
make, is scheduled to make its first flight in June and start
deliveries in 2018.
South Korea is mulling a 100-seat aircraft, and India has
considered a 70-90 seater.
Novices in a highly competitive industry, these largely
state-owned manufacturers are betting on growing passenger
numbers and an increase in short flights operated by small,
efficient craft. The planned craft would be smaller than the
Airbus 320 or Boeing (NYSE:BA) 737, which seat between about 150 and 190
passengers.
Instead, they aim to be cost-effective, nimble alternatives
to planes produced by Brazil's Embraer EMBR3.SA , Canada's
Bombardier BBDb.TO , and European firm ATR, a joint venture
between Airbus AIR.PA and Finmeccanica SIFI.MI .
Many of these could suit some markets in Asia, South America
and Africa, executives say, where demand for air travel is
growing but infrastructure development often lags demand.
Runways at many smaller airports are not always long enough to
accommodate larger planes like the A320 and 737.
But while countries see the launch of a commercial aircraft
as an important economic milestone, designing an airplane from
scratch is also an expensive gamble. Both China and Japan have
struggled to create jets that sell.
TEST CASE
Asian markets are a testbed for smaller aircraft.
The International Air Transport Association (IATA), which
represents airlines, expects Indonesia will be one of the five
fastest growing markets over the next 20 years. But the country
also has many low-density cities where poor airport
infrastructure has been a drag on strong demand for air travel.
Other emerging markets face a similar challenge, Ade Yuyu
Wahyuna, vice-president of business development and marketing at
PT Dirgantara Indonesia (PTDI), told Reuters.
Powered by two turboprop engines from Pratt & Whitney, a
unit of United Technologies (NYSE:UTX), Indonesia's N219 is similar to the
Airbus CASA CN212 that PTDI manufactured under license in the
2000s. PTDI says it has 150 commitments from small Indonesian
regional carriers.
It is just the start of the company's aerospace ambitions,
said Wayhuna. PTDI is also studying a 50-passenger plane.
For its part, Korea Aerospace Industries, which develops and
license-produces fighter jets and helicopters, has been studying
a 100-seat passenger aircraft for more than a year, said an
industry executive familiar with KAI's plans.
KAI would prefer to work with established Western aerospace
firms if it goes ahead, this person added.
"We will initially start with mid-sized passenger aircrafts
or business jets, instead of taking on Boeing directly with
large-sized jets," said a KAI spokesman, who added these remain
mid to-long term plans.
Indian state-owned aerospace firm Hindustan Aeronautics
(HAL) and research agency National Aerospace Laboratories (NAL)
have both studied separate projects for a 70-90 seat aircraft.
HAL and NAL declined to comment.
Industry executives said both are waiting for the Indian
government to clarify its aerospace policy, especially on the
taxation of aircraft and aircraft parts and the opening of
smaller airports in secondary cities.
LEARNING FROM CHINA
China and Japan's experience with homegrown craft, however,
underlines the costly challenge ahead.
The MA60 turboprop, China's first passenger aircraft -
developed by state-owned Aviation Industry Corp of China (AVIC)
and delivered from 2000 - has been involved in 11 major
incidents. This includes four in which the plane was completely
written off and one that resulted in 25 deaths.
In August 2013, the New Zealand government warned tourists
not to fly on a Tongan airline's MA60, citing the incidents.
Another Chinese plane, Commercial Aircraft Corp of China's
long-delayed ARJ-21 regional jet, has not received U.S.
certification after seven years of testing.
In Japan, Mitsubishi Heavy Industries' MRJ regional jet has
also struggled. The jet's first flight in November 2015 was more
than three years behind schedule. Its first deliveries have been
delayed by more than four years to mid-2018.
Embraer has since unveiled an upgraded version of its
regional jets, giving it an order backlog of 513 planes across
its line-up. The MRJ garnered just 233 firm orders.
Industry analysts expect Mitsubishi may only supply a
quarter of the roughly 4,000 regional jets that will be needed
in the 20 years to 2013. Embraer, by contrast, would control 60
percent of the market, they say.
"We are very confident of getting a good share in this
market," Yugo Fukuhara, vice president and general manager of
sales and marketing for the MRJ, told Reuters.
Analysts say the newcomers should learn from the Chinese
experience of putting a state-owned firm in-charge of a aircraft
programmes and trying to source everything at home.
They will also need to master the complexity of a large
supply chain, pass the rigorous certification process, and
establish an after-sales support network.
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Boeing sees new aircraft demand worth $550 blln in SE Asia
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