CHINA CAREERS: Rapid fleet growth calls for expansion across sector

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Aircraft deliveries into the Chinese market continue to grow unabated despite an uncertain economic outlook, with airlines from the mainland and Hong Kong looking to ramp up international and domestic services on both short and long haul sectors.

By some estimates, China's GDP is forecast to rise by around 6.5% annually over the next 20 years. This is lower than the 8-10% growth that the country has chalked up over the last decade, but still much higher than the rest of the world as China moves from developing to developed country status.

"China's share of world GDP will continue to increase over the next several decades," Boeing says in its 2012 Current Market Outlook. "As Chinese incomes converge toward those in the historical industrialised nations, an expanding middle class will expect to enjoy a comparable standard of living and consumption patterns."

Aviation connectivity will be critical as China increases its share of the world trade from 10.4% to 15%, and the country is prioritising investments in airports and air navigation infrastructure, IATA director-general Tony Tyler said earlier this year.

"The challenge is to keep pace with rapidly growing demand, based on the global standards which underpin safe and efficient global connectivity," he added. "Of the 877 million additional global air travellers expected to fly in 2015 [compared with] 2010, more than 212 million will be on journeys within or connected to China."

Despite the economic uncertainties, Chinese airlines continue to make money. In 2011, their revenues rose by 18% year on year to yuan (CNY) 360 billion ($58 billion), while profits fell by nearly 14% to about CNY 28 billion, largely as a result of fuel prices, says IATA. This profit of just over $4 billion, however, still accounted for half of the global aviation industry's profits last year, it adds.

Airbus, in its 2012 Global Market Forecast, says the Chinese domestic passenger traffic is expected to surpass the US domestic traffic in 2031. China also continues to build strong economic ties around the world, driving up international traffic.

The EADS subsidiary adds that from this year to 2030, China is projected to receive 4,272 aircraft worth $634 billion. Boeing, on the other hand, believes that China will need 5,260 new aircraft valued at $670 billion. Regardless of which number you pick, the reality is that China will need a large number of pilots - and technicians - for these aircraft.

The Civil Aviation Administration of China (CAAC) says that the country will need 40,000 pilots by 2015, up from 24,000 in 2010, translating into an annual average growth of 11%, or 3,200. Looking ahead even further, Boeing says that China will need 71,300 pilots and 99,400 technicians up to 2030.

That is driven by the new aircraft that are being delivered. Data from Flightglobal's Insight team shows that Chinese airlines have 1,735 aircraft in their fleet and 735 on order.

Narrowbodies account for 1,241 aircraft, or 72%, of the installed fleet and 481, or 65%, of the aircraft on order. Regardless of the size, the new aircraft are not just intended to replace the older ones that are in service but also to meet growing demand.

Hong Kong's Cathay Pacific, for example, focuses on its status as a hub for lucrative medium- and long-haul routes. Over the last year, it has placed additional orders for Boeing 777-300ERs and Airbus A350s, including the -1000 variant.

On the mainland, China Southern is the first airline to operate the Airbus A380, while Air China has ordered five Boeing 747-8 passenger aircraft. Most of the widebody orders, however, are for twin-engined aircraft that link cities around the world to the three main Chinese hubs of Beijing, Shanghai and Guangzhou. That will grow as China opens up more hubs in cities such as Chengdu.

Narrowbodies, however, continue to account for a significant proportion of the new aircraft orders as markets open up within China and in the region. "Single-aisle airplanes will be preferred for newly opening markets within China," says Boeing in its report. "Within Asia, a mix of single-aisle and twin-aisle airplanes will be needed."

The number of single aisle aircraft going into China could increase if low-cost carriers begin to make an impact in a market that remains a white spot for them. The only significant player in the region is privately owned Spring Airlines, while Qantas and Shanghai-based China Eastern have applied to set up Jetstar Hong Kong.

With low-cost airlines from outside the region gradually increasing their market share in area, it is likely that the three main Chinese carriers and possibly even Cathay could respond. That could lead to a spurt of new narrowbody orders in the coming years, possibly for the 737 Max and A320neo.

The number of regional aircraft, both turboprops and jets, could increase as China continues its airport-building spree. There are firm plans to have 230 airports for passenger and cargo transport at the end of 2015, up from 182 last year. There is also a plan to rebuild or expand around 101 of the existing airports. The government's aim is to give 80% of the country's population access to an airport within 100 kilometres (62 miles).

The growth, however, is already putting strain on the existing infrastructure. Bottlenecks are common at airports, there is a shortage of specialised air traffic management personnel and air navigation remains a problem as China's military still controls airspace. IATA says it has worked with the Chinese government to open new entry points to Chinese airspace and create more flexibility in co-operation with the military, but adds that more can be done.

"The challenge is growing daily as travel demand increases, leading to frustration and delays for airline passengers," says Tyler. "The more flexibility we have in how we use and share airspace with the military as well as between domestic and international flights, the better we will be able to manage growth and meet passenger expectations."

The reality is that despite the growth of the last few years, China's airline industry is still in the nascent stages of its development relative to other countries and regions.

"Historically, the majority of airlines in Europe and North America were large network airlines," says Boeing. "Today a mix of network carriers, low-cost carriers, charter airlines and air cargo operators meets consumer needs. As aviation continues to grow in China, airlines will adapt and evolve their business models to meet the needs of their customers."

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