Rough ride ahead for China's
air industry By Olivia Chung
HONG KONG - Eleven thousand people
representing 500 companies from more than 20
countries were at Hong Kong's four-day Asian
Aerospace show last week hoping to seal deals that
will shape the future of Asia's aviation industry.
And much of the buzz - on the ground and in the
air - was focused on China.
According to
Clive Richardson, a senior vice president of
London-based Reed Exhibitions, which owns the
Asian Aerospace brand, more than 1,500 of the
visitors came from mainland China. Hong
Kong
hosted the conference for the first time in 25
years, after it moved from its original home in
Singapore.
To drum up publicity for the
show and the world's largest passenger jet, the
double-decker Airbus A380 roared over Hong Kong's
Victoria Harbor and the 420-meter-high Two
International Financial Center, the tallest
building in Hong Kong.
The "China factor"
showed how seriously foreign investors view the
huge potential of the mainland's aviation
industry, and indeed, while the statistics are
promising, investors should be prepared to buckle
up for some significant turbulence.
On the
bright side, more new airports will be built, for
example. Wang Changshun, vice minister of the
Civil Aviation Administration of China (CAAC),
China's civil-aviation regulator, said during the
show that traffic growth rates have been
phenomenal, with domestic air traffic doubling
roughly every five years.
CAAC earlier
projected that air-passenger traffic in China
would grow at 11% annually over the next 20 years,
which would make it the world's second-largest
aviation market after the United States.
Chinese authorities also predicted that total
air-traffic volume will reach some 270 million
passengers by 2010. Chinese carriers flew 160
million passengers last year, and the number is
expected to surpass 200 million next year when the
Beijing Summer Olympics are held.
With
predicted growth of this magnitude, China plans to
invest about US$18.5 billion in airport
development, including more than 40 airports to be
added to the current 140.
The enormous
Airbus A380 that buzzed Hong Kong harbor also made
the point that the European plane maker expects
China to order 100-150 of its planes annually over
the next five years, and has plans to build an
assembly line in the northeast provincial-level
municipality of Tianjin to fulfill the orders.
Jonathan Beard, managing director of
airport-consultant group GHK Hong Kong, said that
while airlines and plane manufacturers have
reasons to be upbeat about the mainland's
potential, they should also heed the warning signs
before taking off.
Beard said the industry
is still too tightly controlled, and cited
examples that ranged from limited ticket-price
options and a shortage of pilots and fuel, to
China's unusually tight airspace, much of which is
reserved for military use.
"There are a
lot of difficulties in terms of infrastructure in
China's aviation sector," he said. "It's not just
airports - China also has to use the airspace more
efficiently. On the mainland, in particular, the
Chinese People's Liberation Army takes up a larger
percentage of total airspace than the equivalent
in the United States. China also requires a much
higher vertical separation between its flights
than those in Europe and North America."
The growing air traffic and limited
airspace are already resulting in "crowded skies",
delays and safety concerns, particularly in
southern China's Pearl River Delta region for
popular routes between Hong Kong and Shanghai and
Beijing and Guangzhou.
"If China cannot
address the problems, air-travel growth may slow
down and the demand for new planes may slow down
too, which will eventually affect the
manufacturers' and airlines' expectations," Beard
said.
China is also suffering from a pilot
shortage, he said. While China has targeted
training about 9,000 new pilots by 2010, it is
already behind schedule by about 2,000 pilots,
according the nation's official press agency,
Xinhua, which quoted CAAC vice minister Gao
Hongfeng on the problem.
Beard added that
there are also concerns about industrial espionage
and technology transfers by US and European plane
manufacturers that fear they could be shut out of
the growing market by China's desires to develop
its own aircraft-manufacturing industry.
"There are worries over the transfer of
expertise which would enable China to develop a
competitor to Airbus and Boeing after the plane
manufacturers build their facilities on the
mainland," Beard said.
Beard urged the
Chinese government to play a more active role as a
regulator rather than as the owner of the
country's aviation industry. "The Chinese
government has a huge role to play regulating
them, and it doesn't need to run or own an
airline. Therefore they should let airlines have
more say about aviation fuel and ticketing."
He also criticized China's ability to plot
and follow through with its infrastructure
planning, and cited the country's strategic
railway planning as an example. "They should have
a general aviation-development master plan that
emphasizes collaborations between different
infrastructures," Beard said.
The costly,
underused bullet train, for example, between
Shanghai and Hangzhou is not linked to Shanghai's
Pudong International Airport. "It's crazy!" Beard
exclaimed.
Olivia Chung is a
senior Asia Times Online reporter.
(Copyright 2007 Asia Times Online Ltd.
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