Recovery: Made in China?

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China's air transport industry came out in force in September, hosting the World Route Development Forum in Beijing and backing the Asian Aerospace exhibition in Hong Kong. These events, coming so soon after the opening of long-awaited scheduled direct flights between China and Taiwan,served as a reminder of the importance of the country to the world'sair transport sector. In short, the world is looking to China for positive news, both in general economic terms and for this industry.

In terms of the global economy, the gloom is lifting slightly. Figures are looking more positive. Growth is being seen, albeit with the health warning that these figures are being compared against an already struggling base year.

"The worst part of the global economic crisis seems to be over. But it is only the worst part [that is over]," the director of the World Bank's energy, transport and water department, Jamal Saghir, reminded delegates in Beijing."China and the eastern Asian markets appear to be leading the way."

But much of the stabilisation and early signs of recovery has been driven by government action. This isclearly evident in the air transport sector too. "While we are seeing some recovery, it is not private-sector led," says Saghir.

Positive growth in industrial output figures from China for August provide more encouraging signs.Certainly the aircraft manufacturers remain upbeat on China. Boeing in releasing a 2009 market update for commercial aircraft for the region estimates a need for 3,770 new aircraft over the next 20 years, valuing the market at $400 billion. The growth will prompt China's aircraft fleet to more than treble by 2028. Airbus, meanwhile, in its latest Global Market Forecast, anticipates the Chinese domestic market growing 7% in the next 20 years -growth exceeded only by that other economic great hope, India. Indeed it sees China involved in half of the 10fastest growth markets over the next 20 years.

China's own air transport industry continues to grow. Beijing Airport's spanking new Terminal 3 provides a symbol of its growth. Beijing Airport City Development has just opened a new cargo terminal. Figures for Air China and China Southern Airlines in August saw passenger traffic, driven by strong domestic growth, up around a third and air freight growth returning.

All this though is set against particularly sharp declines seen last summer, as weakening demand was exacerbated by the fallout from natural disasters in the region and traffic restrictions put in place around the Beijing Olympics.

Driving thegrowth is booming domestic traffic. "Although they are getting a strong rebound on domestic [business], the international [business] is struggling the same weakness as other international airlines," notes Asia-Pacific Airlines Association head Andrew Herdman.

It is also set against heavy Chinese carrierheavy lossesin 2008. Strong pressure on yields remains. Air China, in releasing improved first half profits boosted by fuel-hedging gains, is still talking of a "cold winter for the aviation industry". Such talk promotes the continuing consolidation talk in China, most recently the planned China Eastern/Shanghai Airlines tie-up.

International airlines and airports continue to look at Asia and China as the long-term growth region. But how quickly this will come remains to be seen.A look at the stream ofdeferred launches of the new China services US carriers battled so hard to win in recent years tells its own story. Most have been pushed back into 2010.

China remains one of the beacons of hope for an early recovery. But patience may be the name of the game. As Peter Harbison, executive chairman of the Centre for Asia-Pacific Aviation says: "In the near-term, it [China] is not going to be a leader of the Asia region out of the wilderness."