Bjorn’s Corner: China’s civil aviation, from nothing to world’s largest in 2030

Introduction

By Bjorn Fehrm

By Bjorn Fehrm

14 May 2015, C. Leeham Co: In my ISTAT Asia reports, I wrote about how China will overtake USA as largest civil aviation market in  2030. Airbus China Group chairman, Laurence Barron, and I had a chat after his ISTAT presentation where he described China’s evolution as a civil aviation market and how Airbus gradually worked itself from a late and hesitant start to today’s split of the market with Boeing.

Barron provided his slides, some of which  we will use  to review how China grew from virtually no civil aviation after the Chinese revolution in 1949 to the world’s largest market by 2030. We will also look at what aircraft have made up this growth and finally describe how Airbus progressed from a latecomer in 1985 to sharing the market with Boeing today.

China and civil aviation

After the Chinese revolution 1949, civil aviation activities, regulatory as well as passenger carrying, were conducted by China Civil Aviation Authority, CAAC. CAAC was initially managed by the Chinese Air Force and China’s airspace is still 100% controlled by the military.

Initial operation was for domestic traffic only using Russian aircraft types. In 1962 CAAC started international operation to other Communist countries, followed by general international traffic in the 1980s. Aircraft used were predominately Russian types and Boeing 707s bought following President Nixon’s visit to China in 1972. China had previously also bought some British aircraft, including Tridents for short-to-mid haul use.

It wasn’t until 1987 that proper airlines were formed, then splitting CAAC into six geographical airlines that today have merged back into three: Air China (which carried forward the CAAC IATA and ICAO codes), China Eastern and China Southern. With the splitting of CAAC’s roles into a regulatory agency and independent airlines, the development of civil aviation started, Figure 1.

Screenshot 2015-05-14 23.15.38

Figure 1. China’s civil aviation growth. Source: Airbus.

 

The initial five years were characterized by the newly found airlines finding their feet. After the re-merger of the initial six into today’s three international carriers, the growth started, Figure 2.

Screenshot 2015-05-14 23.15.57

Figure 2. Deregulation and private initiative spurs the growth. Source: Airbus.

From 2004 non-state airlines were allowed and this created today’s dynamic environment with over 40 Chinese airlines serving the market. By 2014, almost 400 million passengers are carried between 400 airports with the largest being among the world’s leading airports in terms of passenger throughput, Figure 3.

Screenshot 2015-05-14 23.20.51

Figure 3. China civil aviation status 2014. Source: Airbus.

With China leading the developing regions in the world in growth (six billion people with an average air travel growth of 6 % versus one billion in the developed North America, Western Europe and Japan with average 4.2% growth) the Chinese market will overtake the US market and be the world’s largest by 2033, Figure 4.

Screenshot 2015-05-14 23.22.33

Figure 4. China becoming the world’s largest civil aviation market by 2033. Source: Airbus. Click on image to see details.

Chinese Aircraft market

By 1987 the Chinese aircraft market listed the following types:

Airbus A310, Antonov An-12, Antonov An-24/Xian Y-7, Antonov An-30, BAe 146, Boeing 707, Boeing 737-200, Boeing 747SP, Boeing 747-200, Boeing 767, Hawker Siddeley Trident 2E, Ilyushin Il-18, McDonnell Douglas MD-82, Tupolev Tu-154B, Tupolev Tu-154M, Vickers Viscount, Yakovlev Yak-42.

As can be seen, Boeing had done a good job after President Nixon opened the door in 1972. Airbus had at the time sold a few A310s to China Eastern and had still not sold more than 20 aircraft 10 years later, by 1997. It required the formation of a local sales company, a joint venture A320 wing production facility and final assembly line to correct the slow start, Figure 5.

Screenshot 2015-05-14 23.20.04

Figure 5. Airbus action in the Chinese market to come to a draw with Boeing by 2013. Source: Airbus. Click for better view.

From 1999 China has produced A320 wing parts at AVIC. Airbus was still number three after Boeing and McDonnell Douglas 20 years into their Chinese venture despite these efforts. This was not the goal; rather it was equal market share to the US competitors by 2015, today Boeing. The result was intensified sales with package deals and then later the setting up an A320 FAL in 2007. The result was an equal share of in-service aircraft to Boeing by 2013, 2 years before target.

Summary

The Chinese civil aviation market has had a phenomenal development after the 1987 split of CAAC into proper airlines and a state regulatory agency. The large carriers are still state run as Airbus learned when trying to persuade them into adopting the A330R as a good solution to the domestic congestion problem. Decision making is still conservative and slow.

The dynamic allowed by the establishment of new private airlines since 2003 has enabled the growth that will now carry this market to the world’s largest in the next 20 years.

19 Comments on “Bjorn’s Corner: China’s civil aviation, from nothing to world’s largest in 2030

  1. Bjorn,

    Good stuff, as always. But, typo in article headline “largets” I’m sure you meant “largest”

  2. Quite impresive. Thanks for such a superb piece.
    One thing remains to be clarified: Since the 3 largest are still state owned, then the COMAC airplanes have very sure sales in the thousands!!!
    That will certainly change the game, not only in China, but in less developed countries, like those in Africa, Asia and South America.
    As soon as they have some 500 units flying in China, the world would not be enough!!

  3. Impressive developments. I think the reality for the next 10 years will that the growth will be filled in mainly by Airbus and Boeing.

    “The result was an equal share of in-service aircraft to Boeing by 2013, 2 years before target.”

    If we at in-service, we are basically looking back 20 years. Do you have figures on current backlogs and yearly deliveries to China from Airbus and Boeing. Is there still an equal share?

  4. He did say the region, not sure how it adds up but India next door, Indonesia, Malaysia, Thailand, not to mention others as Korea, Japan and Vietnam

    • Thanks guys, my bad. I misinterpreted one of Airbus slides, it should be developing regions (where Asia is the largest), fixed that in the text.

      Bjorn

  5. Good stuff, thank,

    it will be interesting to look at a similar analysis for India looking forward to 2035

  6. Björn, when the topic is China and the growth of its civil aviation market, perhaps one should talk about the role of its high speed rail system as well.

    China’s high speed trains will work very well as spokes for the major hubs. As the high speed rail networks are being expanded while the average and top speeds are increased, the catchment areas of the major hubs will increase. For example, the maximum service speed of next generation high speed trains (i.e. AGV-II) will be around 400 km/h and new lines will likely be constructed in order to accommodate such high speed levels. With average speeds of around 300 km/h, the catchment area radius for a major hub could be as much as 1000 km.

    A hub airport draws in passengers from a range of places in order to reach a critical mass of passengers to make flights to other destinations economic. Integrated mega transport hubs of the future could very well reduce many secondary airports to mainly providers for LCCs, which wold mean that secondary airports in China could loose ever more market share to the bigger and far more profitable mega hubs.

    The pattern we see here is fairly similar to the results we had for Spain. By improving the connection between two airports, the larger airport gains market share at the expense of the smaller one(s). The intuition behind this result is that the expansion of the combined catchment area works in the favor of the airport with the higher level of service (frequency in this case). Passengers who were previously captives are now in a position to choose, and they are more likely to choose the airport with the higher service level. Note that this is not only beneficial to the larger airport, but also to the customers, as their freedom of choice increases.

    https://aerlinesmagazine.files.wordpress.com/2011/01/49_terpstra_hst_ams_bru-1.pdf

    Regarding the topic in question, here’s an interesting view from Flightglobal.

    China’s economy is set for robust growth over the next 20 years, which will drive the country’s industrialisation and urbanisation. This will lead to changes in China’s consumption structure, generating increasing demand for services – including air transport.

    As China continues to liberalise its air transport industry, its major airlines, taking advantage of global alliance membership, will gradually shift their focus from domestic to international markets to become competent global competitors. Chinese airlines currently rely heavily on the domestic market. The 14.7 million international passengers carried in 2009 accounted for only 6.4% of the total passenger numbers of 230 million. China envisages this international share to reach 50% by the end of the decade, and 60% by 2030.

    To achieve these goals, more mergers and acquisitions, following the China Eastern and Shanghai Airlines tie-up, are likely in the domestic market. This will create two to three large network carriers for international competition. China hopes at least one of these will be in the global top five in both domestic and international performance by 2030.

    But the international expansion of Chinese airlines cannot be successful without the strong support of a sophisticated hub-and-spoke network, which did not begin to emerge in China until the early 2000s. Point-to-point is still the dominant route structure of Chinese airlines. For this to change, development in hub and spoke airports will need to be strengthened.

    http://www.flightglobal.com/news/articles/china39s-air-transport-plan-rising-dragon-355695/

  7. Shanghai has two airports, Pudong with 51m passengers and Hongqiao with 37 million.

    When thinking of total passengers in future years a common metric is ‘average flights per head’ of population.
    From the graphs above I cant see the correct passenger data for 2014, is it 400 million passengers carried through 400 airports from text ?. The graphs indicate around 850 million passengers in 2014 ?

  8. Witnessing the development of infrastructure (PEK,PVG,TSN, amongst others) in recent years China appears to be equipping itself well for a substantial growth in domestic and international air travel. What is likely to hold it back is the unwillingness of the military to provide airspace. Travelling up and down the coastal region is like being in a flying traffic jam and I can only guess it is due to this restriction.

    I would also concur with the comment on the high speed rail system which is incredibly impressive, the lines, trains and stations are modern wonders. Whether they augment or fragment the need for air travel is a moot point as I opted again and again to use the HSR in preference to the sitting in airports waiting for delays in ATC.

    If such growth as suggested occurs it probably wont matter either way. China however is very vulnerable to an economic downturn in my opinion, in fact much of the infrastructure we are seeing is a government response to the economic crisis and is surely not sustainable

  9. Bjorn,

    Airlines, airplane manufacturers, and commentators /analysts /observers never talk about climate change. What, me worry?

    Are they ignorant deniers or think that they have such a good track record of continuously improving fossil fuel efficiency that they will be able to grow as expected and continue to conduct business as usual? Either way it would be heads in the sand.

    Read the 2013 IPCC report or at least the Policy Summary; it’s on line. What part of the scientific conclusions are you well enough qualified to doubt?

    It is going to be a requirement after say 2020, when everybody has awakened, that airlines must significantly reduce fossil fuel use below any business as usual. And I believe that after about 2030 the airlines contribution to carbon pollution is likely to increase well above its current 2-3% — because other major sources will have made much greater carbon reductions than airline operations. Do aviation CEO’s know this or are they all Republicans?

    The two major carbon polluters, the US and China, will both be hard at work on reducing carbon and methane pollution. There are and will be national goals.

    One of the largest steps forward would be for Boeing to field a new NAS (737-8 MAX successor) in service by 2025 with say 30% better seat mile performance than that MAX and A320 neo (and way better than China’s C919). I have no doubt that can be done. It would likely be quickly followed by Airbus. Between the two, the growing airline NAS fleets (10-20,000 over 20 years?) would save 10-20x the millions of gallons of fossil fuel and millions of tons of annual carbon compared to that saved by any new MOM Boeing airplane compared to a combination of the A321 neo LR and 787’s/A350’s flying 4-5000 nm routes.

    My favorite NAS would carry 220 passengers or so in one class; have growth beyond; fly 2000 nm not 3400; cruise at .72 mach not .78-.8; have a straight composite material wing of 118′ span on the ground like 737/A320’s — but with considerable laminar flow and folding wing tips for say 135′ in flight; have two aisles for faster turnaround times and close to the same gate to gate times as a .78 mach single aisle NAS; have 2/2/2 or 2/3/2 seating with 18″ wide seats ; in an elliptical fuselage (I looked at 2 new Embraer E2’s halves with 2 seats between and faired to a smooth surface over the top and with a flatter smooth bottom); carry only 1000 lbs. of high priority domestic cargo beyond passenger baggage — use dedicated freighters for more; get 5% or more fuel burned reduction from increased body lift (the wider MIT design claims 7.9%) and use 2 new engines on -wing of bypass 16-20, fan pressure ratio around 1.4 — they may be a little over 20,000 thrust, not 35,000. This is a light weight airplane. It is not burdened on every flight by the small % mission use over 2000 nm or by carrying cargo containers. It is doable, it’s economics will be great, and it will significantly reduce carbon emissions in the US, Europe, China. India and everywhere. Oh, and it will beat any rewinged, reengined A320 SR.

    Bjorn, you could generate some studies along these lines

    Remember, greenhouse gasses have a cumulative effect. From 1870 to 2013, human activities have put 1.6 trillion tons of carbon dioxide into the atmosphere with a number of measured effects. If we continue of a high fossil fuel diet, that will become over 7 trillion tons by 2100. See the IPCC report.

    Let’s have the NAS in 2025, not following a relatively straightforward MOM in 2025-2027 for a relatively small niche years after the A321 neo LR and, maybe later, a rewinged A321 neo LR version — even reengined too.

    Jim Krebs

    • …”single aisle NAS; have 2/2/2 or 2/3/2 seating…”

      – It can’t be a single aisle when you have 2-2-2/ 2-3-2 seating.

  10. Hi Jim I sympathize with your aviation carbon outlook. Unfotunately you are right. Aircraft get more efficient/ cleaner about 1 % per year, 20% for every new generation that surfaces every 20 years. Airtraffic grows 4-5% on average per year, do the math..

    Pointing at our selves iso others, 70-75% of traffic is tourism, think about that.. its that great city trips to Rome, HKG or NY and those exotic holydays to great, cultural rich, places we and our families/ neighbours value so much..

    A culture change about travelling/ holydays is what would help more then any GENX LEAP PW3000X Open Geared Electric innovation.

    Definately something w’ll avoid discussing on this blog.. or everywhere else. Somene elses responsibility 😐

    • keesji

      In response to climate change a culture change will happen –i.e., conservation — fly less. The magnitude of individuals and business conservation will depend on what the air transport and energy industries themselves will have done to dramatically reduce air transport carbon emissions on a timely and continuing basis

      Such actions as:
      – carbon-neutral biofuels, mixable with jet kerosene
      – the domestic NSA I described above for 2025 service
      – more efficient dedicated air cargo carriers

      These industries need to take off the blinders and get off their ass.

      • keesji,

        To continue — how about China and the US and their energy companies forming a consortium to scale up production of the most promising carbon-neutral aviation biofuel — on an urgent basis — and use it in the US and China domestic air transport systems on a large scale 10 years from now — the two largest fuel user markets on the globe, by far.

        Maybe start by mixing 3o% biofuel with 70% fossil fuel in the NSA I describe (that would be 60% less fossil fuel and carbon generation per seat mile than 737-8 MAX/A320 neo) — and reach 100% biofuel for all airplanes in our respective domestic markets 5 -10 years later.

        • Jim, China is an environmental disaster happening. We told them not to do what we did / do, but for some reason they won’t listen.

          Only realistic option is helping them build massive nucleair power plants ASAP to stop the 200-250 additional coal powered plants every 4 yrs.

          http://instituteforenergyresearch.org/images/china-coal-electricity-generation.jpg

          On aviation, biofuel isn’t the golden bullit either at this stage. The way we produce it today to make ourselves feel sustainable better shouldn’t be looked at in detail and, below the line, total impact on our environment.

          W’re clearing peatland to plant oil palms and burning down tropical forests on an enormous scale to produce bio-fuel. Demand is high, so it’s good business.

  11. Everyone is talking about short haul aircraft all the time. These can easily be replaced by high speed rail or maglev but what about long haul ? What about the 777X succesor ( I use the 777X because it utilises the newest engine technology ) ? On mach 0.81-0.85 you can use natural laminar flow so you need the hybrid laminar flow technology. But can you implement it or will be too complex ? What changes can we make to the long haul aircraft to make it more efficient ?

  12. “and had still not sold more than 20 aircraft 10 years later, by 2007.”:
    You mean 1997 not 2007, right?

Leave a Reply

Your email address will not be published.