China's fleet expected to triple in two decades

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Last updated at: (Beijing Time) Tuesday, September 16, 2003

China's fleet expected to triple in two decades

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China's civil aviation fleet is expected to more than triple its size in two decades from 586 planes in 2002, as demands on air travel will continue to grow, a leading industrial research institute said yesterday.

The country is projected to add 1,901 airliners between 2003 and 2022, when passenger air travel, measured in revenue passenger kilometres (RPKs), will post an annual increase of 8.3 per cent, the Aviation Industry Development Research Centre of China said.

RPKs are a result of multiplying the number of fare-paying passengers by the distance in kilometres flown by them.

In 20 years, China's RPKs will rocket from 126.87 billion in 2002 to 627.7 billion, the research centre said in its annual aviation market forecast.

"The predicted robust growth momentum is supported by the country's rapid development in national economy, foreign trade and tourism, plus the deepening reform in the aviation industry," said Wang Boxue, a senior researcher with the centre.

In the years leading up to 2022, China is expected to attain an annual gross domestic product (GDP) growth of 7 per cent, the centre's forecast report quoted predictions of some authoritative agencies.

Such a growth trend will provide a solid footing for the air transport industry to fly higher, Wang said.

The researcher said that as China opens wider to the outside world, the country will increasingly become a magnet for foreign business people, meaning its international air passenger and cargo transport market will further grow.

"As it turned out, SARS (severe acute respiratory syndrome) had just a very limited and temporary impact on China's economy," he said. "The long term and overall development prospects are very favourable for the civil aviation sector."

For one thing, the people's improving living standards have made air travel increasingly affordable, in addition to being convenient and time-saving, he said.

Furthermore, a thriving tourism industry in China also will contribute to rising air traffic volume, he said.

The World Tourism Organization predicted that by 2020, China will become the most visited destination in the world, and China forecast its tourism will grow by up to 11 per cent yearly between now and 2010, according to the report from Wang's centre.

All the factors, plus the 2008 Olympic Games in Beijing and the 2010 World Expo in Shanghai, mean that the country will have to dramatically expand its air transport capacity, the report said.

"To satisfy the RPK growth, China's civil aviation industry is expected to provide 871.8 billion available seat kilometres (ASKs) in 20 years from 198.1 billion in 2002," the report said.

ASK is the result of multiplying the number of passenger seats available in the aircraft by the distance flown in kilometres.

To reach the ASK growth demands, the number of passenger planes in Chinese mainland will have to reach 2,050 by the end of 2022 - including 1,403 large jet liners with more than 100 seats, and 647 regional airliners, it said.

"During the next 20 years, 437 planes will be taken out of service. Their replacements will account for 23 per cent of the total additional aircraft," Wang said.

In other words, 77 per cent of the added 1,901 planes will be used to meet the rising air travel demands during the 20 years.

As to regional planes, the aviation market forecast report said that with the optimization of the country's air routes and fleet structure, the country's airlines will favour planes with 50 to 70 seats.

"In a time frame of 20 years, regional airliners will account for one-third of China's civil aviation fleet," the report said.

The report did not say what the source of the new planes will be. Were they all imported, the procurement cost could surpass US$120 billion, according to Liu Gaozuo, president of China Aviation Industry Corp I.

Airlines pursue high-flying ambitions

A restructured Air China Group aims to become the top airline in Asia and the world by 2010, according to its president Li Jiaxiang.

Li said that his company will co-operate more with domestic and overseas competitors to form a much wider air network.

"Air China intends to be listed abroad when the conditions are right," Li said.

Air China now owns 125 aircraft, 386 air routes and makes over 3,300 regular flights per week.

"Our business has doubled since the reorganization last October," said Li.

Its routes and those of China Southwest Airlines and China National Airlines are currently being restructured.

New Air China

Li said the new Air China is also looking for a chance to join a global aviation alliance.

The president said his company is trying to create an attractive flight environment for passengers.

He said people flying Air China's international flights will now not only get service with a smile, but French flair from their cabin crew.

Staff have adopted new uniforms in the first half of this year.

"This clearly signals to our passengers that our services have been combined," said Li.

French designer Olivier Lapidus beat more than 20 rivals in a public tender to win the right to design the uniform.

Another development for Air China is the trend in the civil aviation industry to separate passengers and cargo.

Air China plans to build the country's largest air freight company with Hong Kong Citic Taifu Company and Beijing Capital Airport Group.

Registered capital for the joint venture will be 2.2 billion yuan (US$270 million), with Air China as the biggest shareholder.

The joint venture will own four Boeing-747 cargo planes and employ about 1,200 staff. The air routes will reach 29 cities, including New York and Frankfurt, in 19 countries.

Air China's annual cargo business is worth more than 3 billion yuan (US$370 million), a quarter of its total income.

China Eastern Airlines

China Eastern Airlines has almost fully recovered after the business slump caused by the SARS outbreak, said Ye Yigan, chief executive officer of the airlines.

"Our domestic flights have nearly returned to normal and overseas ones are also approaching previous levels," he said.

Ye is satisfied with the carrier's performance in July, August and September, saying sales are expected to exceed those of the same period last year. Ten shuttle flights a day between Shanghai and Beijing are now more than three-quarters full and the Shanghai to Hong Kong route has almost two-thirds occupancy.

"Business will be boosted by the golden holiday week around National Day which falls on October 1," he said.

Ye, also president of China Eastern Airlines Group Company, is confident sales in the latter half of this year will also be better than those of the same period last year.

But he confessed sales, although good, cannot make up for the "heavy losses the airline suffered during the SARS period."

It lost 1.25 billion yuan (US$151 million) in the first half of this year due to the drop in passenger numbers.

Travel agencies were able to close their doors when SARS hit. But airlines still had to pay the high rental and loan interest for their leased aircraft even when they were not operational, Ye said.

He said China Eastern had to spend 18 million yuan (US$2.18 million) daily on loans and interest before any other expenditure.

"But we are confident we will achieve our goals because our staff support the company," he said.

During the SARS period, administrative costs were reduced and staff salaries cut by about a fifth. But when sales went up in July, the airline immediately increased its employees' salaries.

As one of China's three major airlines, the Shanghai-based China Eastern has completed its strategic development blueprint that requires an annual 8 per cent growth rate.

"The growth rate is a must. Otherwise, the airline can't match the city's economic development," Ye said.

The carrier expects to achieve sales of 27 billion yuan (US$3.26 billion) by 2005, becoming one of the world's top 30 airlines.

Its plan is to increase its fleet of 160 aircraft to 194 to transport 27.55 million passengers in 2005.

Ye said after the September 11 tragedy, China Eastern ordered 30 planes including 20 A320s and 10 Boeing 737-700s. Eighteen of these aircraft will be delivered this year, seven next year and five the following year.

"The airline is considering ordering more planes, including A300-600s," he said.

The fleet expansion should benefit the domestic flight network.

"Shanghai will be the airline's hub so more passengers can transfer to local airports more easily," he said.

At present, the carrier has a 30 per cent share of the Shanghai market. It is expected to reach 40 per cent within three to five years.

Ye told China Daily the airline wants to expand regional air routes to China's neighbours, with more flights added to Japan, South Korea and India. A new air route to Moscow is expected to start next year.

In August, China Eastern restored its twice daily flights from Shanghai to Singapore, daily service to Paris and four flights a week to Sydney.

While consolidating routes to the United States, France and Australia, it is also preparing to set up a new air route to London next year.

China Southern Airlines

Guangzhou-based China Southern Airlines, also one of the country's three biggest airlines, will purchase four Boeing 737-800 passenger planes and another two Airbus 319-100 before the end of the year.

The new aircraft will be put into service on both domestic and international routes from 2004, according to Yan Zhiqing, president of China Southern Airlines.

The airline will also import six Boeing 737-700 and a Boeing 777-200 model in 2004 and another Boeing 737-700 in 2005.

Two new cargo aircraft will be bought and several small planes leased for domestic regional air routes this year.

"The new purchases reflects China Southern Airlines' great confidence in the future aviation market," Yan said.

China's aviation market has bounced back since June when Beijing and Guangdong were removed from the World Health Organization's SARS-affected area list, Yan said.

The passenger flow between Hong Kong and the mainland is expected to increase sharply, according to Yan, spurred on by a new economic partnership agreement that takes effect next year

China Southern Airline, which went public on the Shanghai Stock Exchanges in early July, has raised enough funds to boost its aircraft fleet, Yan said.

The company has raised 2.7 billion yuan (US$325.3 million) on China's A share market.

The airline is now negotiating with government departments and airports at home and abroad to start more domestic and international flights in the years ahead.

China Southern Airlines now has international air routes to Hong Kong, Japan, the United States, Europe and East Asia.

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