28 August 2015

Chinese Airlines Are in It for the Long Haul

A pithy analysis of the challenges and opportunities facing China’s domestic airlines and their foreign competitors, from a noted industry expert.

Marc Szepan, “Chinese Airlines Are in It for the Long Haul,” The Diplomat, 28 August 2015.

Good news for Western aircraft manufacturers may be bad news for Western airlines

Amid turmoil in China’s stock market and concerns about the health of the Chinese economy, bullish views on China’s long-term prospects appear refreshingly contrarian. Earlier this week, Boeing released its latest market outlook, which forecasts China’s domestic air travel market to become the largest in the world and China’s commercial aircraft fleet to almost triple by 2034. This opportunity for Western – and indeed Chinese – aircraft manufacturers, however, represents a significant competitive challenge for Western airlines.

Boeing’s View of the Chinese Market

Once a year Boeing updates its Current Market Outlook (CMO), which forecasts the development of the global aviation industry and global aircraft demand 20 years into the future. In its latest CMO for the years from 2015 through 2034, Boeing remains optimistic about the long-term development of the Chinese economy in general and China’s domestic aircraft demand in particular. For China, Boeing expects annual GDP growth of 5.6 percent and growth rates for passenger traffic and airfreight of 6.6 percent and 7 percent respectively, making China the world’s largest domestic air travel market. Boeing forecasts this growth to result in almost tripling China’s domestic commercial aircraft fleet, from 2,570 aircraft in 2014 to 7,210 aircraft in 2034. Including replacements for retired aircraft, this growth is forecasted to generate a net demand of 6,330 aircraft with a market value of $950 billion. China’s domestic widebody fleet is projected to grow from 460 aircraft in 2014 to 1,680 aircraft in 2034 or from about 18 percent to 23 percent of China’s total domestic aircraft fleet. …