Airbus bullish about local air market
(China Business Weekly)
Updated: 2004-07-19 14:11

How will China's aviation sector fly in the coming two decades?

Europe-based global aircraft manufacturer Airbus last week made an optimistic prediction, in which it suggested Chinese air travel will continue to grow strongly, to nearly five times its present level.

As a result, China's aviation sector will play a pivotal role in the future evolution of the global aviation industry, Airbus officials predicted.

Adam Brown, Airbus' vice-president of customer affairs, said air traffic in the Chinese mainland will post robust growth over the long term.

He also predicted passenger traffic carried by the Chinese mainland's airlines will grow more than 20 per cent annually this year and next.

That growth, beginning in 2006, will taper off to about 8.1 per cent per year, to reach almost 500 billion revenue-passenger-kilometres -- nearly five times its present level -- by 2022.

"Air travel in China will be driven by continuing robust growth in gross domestic product (GDP) and personal incomes, as well as the deregulation of ticket prices, privatization of airlines, less restrictive bilateral air services agreements with other countries, such as the one recently signed with the United States, and the increasing number of visas being issued to outbound tourists," Brown said.

The Beijing Olympic Games in 2008, Shanghai Expo in 2010 and Guangzhou Asian Games in 2010 will also stimulate air travel in China in the next few years. The planned free-trade zone between China and the Association of Southeast Asian Nations will also spur air travel in the region.

Between 1980 and 1998, demand for air travel on China's domestic air routes, fed by a sharp increase in disposable incomes, multiplied no less than 20 times. It grew at an average of 18 per cent per year compared with an average annual 8.9-per-cent growth for all modes of transport.

During the same period, airlines based in the Chinese mainland achieved even more stunning growth, in excess of 20 per cent per year on international routes, where traffic multiplied 37 times.

sDuring the next 20 years, to accommodate growing travel demand and to renew their fleets, the airlines must acquire no less than 1,316 mainline passenger jets -- aircraft with at least 100 seats -- worth about US$140 billion, indicates Airbus' research.

That puts China in second place, behind the United States, as a potential market for Airbus products. It also means one in 12 jetliners produced during the next 20 years will be used by Chinese mainland airlines.

The total includes 701 single-aisle aircraft, such as the A320 family; 178 small wide bodies, such as the A330-200; 332 intermediate wide bodies, such as the A330-300 and A340 families; and 105 very large aircraft, such as the A380.

The A320 family, already a familiar sight in China's skies, will be needed to accommodate growth on low-density routes, and to replace ageing aircraft used on the routes.

More than 150 of the A320 aircraft are already in service with Air China, China Eastern, China Southern and Sichuan Airlines, and 79 aircraft are on order, including eight A319s for Hainan Airlines.

The A319 will soon be flying from several airports in communities at high altitudes. That will extend the benefits of jet travel into China's remote areas.

Small twin-aisle aircraft, such as the A330-200, or the potential competing project will account for 14 per cent of the Chinese mainland's market.

By 2022, as many as three-quarters of the world's in-service fleet of "mid-market" aircraft will be small-winged, optimized short-medium-range aircraft used on flights no longer than China's domestic routes, while the remaining quarter will be larger-winged more capable wide bodies flying on longer routes.

Brown said the laws of aerodynamics haven't changed since Airbus designers optimized the configuration of the A330 to make it the most efficient aircraft in the category.

Brown said, Airbus is well positioned to profit from the growing market, with the A321 and the A330-200.

Together -- since they began flying in 1994 -- they have propelled Airbus to a 60-per-cent share of annual deliveries. At the end of last year, they accounted for 90 per cent of the total firm order backlog in the category.

Both the A330-200 and A321 are used extensively in Asia, and frequent re-orders by operators confirm their "best-in-class" status.

Last year, China Southern Airlines signed a purchase agreement with Airbus for four A330-200s, to become the first customer of the aircraft in the Chinese mainland.

A growing number of Chinese airlines are interested in that type of aircraft.

Brown predicted 332 of the aircraft needed during the next 20 years will be larger, twin-aisle planes with 300 to 400 seats, such as the A330-300 and the four-engine ultra-long-range A340.

To handle growing traffic on a number of major intercontinental trunk routes as landing slots become increasingly scarce, airlines in the Chinese mainland must move to the new generation of aircraft, which is larger, more environmentally friendly and more economical.

Airbus expects Chinese airlines will be operating as many as 105 of these very large aircraft, with more than 63,000 seats combined, by 2022.

As China enhances its reputation as the world's manufacturing factory, Airbus believes Chinese airlines will need A380 freighters. The new type of aircraft will enter service in 2008.

Both FedEx and Emirates have already announced plans to operate their A380 freighters on routes to China, and they're likely to be joined by other overseas cargo carriers.

Very large aircraft, such as the A380 -- even though it represents only 8 per cent of the aircraft delivered to airlines in China -- will account for almost 18 per cent of the total dollar value.

Brown predicts airlines in the Chinese mainland, over the long term, will be among the world's largest users of A380-type aircraft.

The attractiveness of Beijing as a destination, together with its strategic position at the heart of what is due to become one of the world's largest trading blocs, makes Airbus believe, within 20 years, the airport in Beijing will rank seventh in the world in terms of usage.

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