China's aviation sector gaining
altitude By Paolo Hooke
As China opens to the outside world, its
rapid economic growth, increasing levels of wealth
and surging domestic, inbound and outbound tourism
are fueling a skyrocketing demand for air
services.
China's civil aviation industry
transported 160 million passengers and 34.1
billion tons of cargo in 2006, rising 15% and
11.2% year-on-year respectively, according to the
Administration of Civil Aviation of China (CAAC).
Over the past three years, air transport
turnover, passenger
volume
and cargo and mail traffic have grown at an
average annual rate of 15.3%, 15.5% and 13.8%,
respectively.
Thanks to this double-digit
growth in passengers and cargo, the sector has
regained financial altitude. It recorded a loss of
640 million yuan (US$82 million) in the first half
of last year due to high jet fuel prices, but
recovered to enjoy profits of 5.5 billion yuan in
the third quarter, up by 600 million yuan on the
corresponding period in 2005, helped by fuel
surcharges.
China's civil aviation
industry garnered 65.4 billion yuan in
third-quarter revenue, climbing 22.2% on-year.
By the end of 2006, 15 Chinese carriers
were flying to 88 cities in 43 countries,
providing 1,307 return flights per week, and 93
overseas airlines operated services to 31 mainland
Chinese cities, offering 262 return weekly
flights.
To meet sharply rising growth in
demand for air services, Chinese airlines are
busily expanding their fleets.
One-hundred-and-fifty-five planes will be
delivered to China this year, with 25 aircraft to
be taken out of service. Altogether, Chinese
airlines will have a fleet of over 1,000 planes
this year.
Last October, China inked a
deal with French aviation giant Airbus for 150
A320s and 20 A350s, the largest-ever agreement in
the history of the Chinese aviation sector.
The country is also making considerable
efforts to build aviation infrastructure by
constructing and expanding airports. China will
pump 26 billion yuan into civil aviation
infrastructure this year, according to Yang
Yuanyuan, director of the CAAC.
Foreign
giants are rushing to tap the highly lucrative
sector, with the most notable rivalry being
between Airbus and Boeing. Last October, the US
giant established an aircraft conversion joint
venture in Shanghai. Boeing has a 60% share of
China's first foreign-controlled aircraft
maintenance, repair and overhaul joint venture,
Boeing Shanghai Aviation Services. Shanghai
Airport Authority and Shanghai Airlines have 25%
and 15% holdings, respectively.
The same
month its European competitor, Airbus, signed a
joint venture contract with China Aviation
Industry Corporation I (AVIC I) and AVIC II, who
will hold 5% and 25% stakes in the Airbus
Engineering Center in Beijing. Airbus holds a
majority 70% share. The agreement strengthens
cooperation between Airbus and Chinese airlines,
transforming the center into a Sino-European joint
venture.
Outlook China's
aviation industry holds massive potential,
stimulated by a surge in the country's tourism
sector. According to the World Tourism
Organization, by 2020, China is expected to become
the world's leading tourist destination and the
fourth-largest source of tourists.
A large
influx of foreign visitors is expected for the
2008 Beijing Olympic Summer Games and the 2010
Shanghai World Expo. China's air transport is
projected to sustain growth of 14% in the
2006-2010 period, according to Gao Hongfeng,
deputy director of the CAAC.
It is
forecast that by 2010 China's air transport
turnover, passenger traffic and cargo and mail
traffic will gain 14%, 14.5% and 13% respectively.
China's civil aviation sector is expected to
sustain growth of 11% over the next 10 years,
according to the CAAC.
It is forecast that
the sector will require over 3,000 planes in the
next 20 years. State-owned firm AVIC I predicts
that the industry will need 3,110 more civil
planes in this period. By the end of 2025, China
is seen to have a fleet of 3,370 aircraft, with
2,470 large planes.
It projects that
passenger volume will top 1 trillion
person-kilometers by this date, witnessing a
yearly rise of 8.6%. Cargo volume will reach 60
billion ton-kilometers with a yearly rise of
10.7%.
This is mirrored by a forecast made
by Boeing, which says that China's airlines will
buy 2,900 planes at a cost of $280 billion over
the next 20 years. The country is expected to
become the world's second-largest civil aircraft
market and the fastest-growing aircraft market by
2025, according to the US aviation giant.
In its 11th Five-Year Plan (2006-10),
China will build or expand some 60 airports,
mostly in the western region. The country
presently has 147 civil airports, with five added
in 2006, all in the west. In the next five years,
the number of airports will rise to around 190.
Government policy To promote
services from major airport hubs to smaller cities
and develop air routes in northwest China, the
CAAC will grant cash subsidies to airlines, with
Air China and Hainan Airlines the first carriers
to be involved in the scheme. They will receive 10
million yuan to operate feeder routes in northwest
China on a trial basis.
The CAAC has also
formulated policies for the development of Wuhan
as the country's fourth aviation hub, which will
be a pilot city in China's reform of air
transport. Local carriers will be permitted to
offer services connecting Wuhan and other cities
in China without first gaining clearance from the
CAAC, as is normally required.
Not only
will this help develop central China, it will also
join the country's remote regions. The three hubs
of Beijing, Shanghai and Guangzhou currently
handle 40% of China's passenger and cargo
transport.
This month, China for the first
time specified a timetable for manufacturing large
planes, in a move that is bound to cause anxiety
for Airbus and Boeing, the only suppliers of large
planes to the country.
According to Huang
Qiang, secretary general of the Commission of
Science, Technology and Industry for National
Defense, it is expected that that within two or
three five-year plan, locally-made large planes
will come into use.
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