It’s been published many times during the past months that the Chinese economy is winding down, public spending dropping back and investment by foreign companies starts to slow
Is this really the case and if so how would this affect the aviation industry in the medium and long term?
German companies for example have invested almost 40 billion euros in China in the form of new industrial set-ups, factories and high-tech know-how.
In contrast - Chinese companies have only invested in Germany to an amount of one billion euros.
The May cargo figures (see Air Cargo Growth article in this issue of CFG) showed a slight pick-up in cargo moving out of China in May of this year. However, not enough to be able to state that the Chinese economy is getting back to its old self and that aircraft are leaving Shanghai, Beijing or Zhengzhou with full bellies or upper decks.
It is said that market out of China has stabilized somewhat, but that rates are the worst ever since more than five years.
Passenger traffic shows a completely different picture.
China taking the pole position in aviation
However, when we look at the number of airlines registered in China, then it’s almost impossible to imagine the market falling apart.
Admittedly, many of these Chinese carriers are local and regional passenger outfits and some of them belong to other larger airlines.
At last count, there were almost forty different Chinese carriers operating in this vast country.
The largest and most successful being Air China, China Eastern, Hainan Airlines, China Southern and Shanghai Airlines, all of whom have their own “cargo arm” consisting of full freighter aircraft.
The Chinese aviation industry has been growing at a staggering rate of 17% since the early nineteen eighties.
Here again, passenger traffic dominates with an expected 500 million passengers being moved every year by the end of 2015. This compared to 230 million in 2009 is a tremendous leap.
Massive increase in lower deck capacity
Boeing, which is always optimistic in its forecasts, says that China has need of over 4,300 new aircraft in the next 20 years. That’s more than double of what’s now plying the Chinese skies.
Their colleagues at Airbus are somewhat more conservative noting that it’ll be somewhere in the region of 3,200 aircraft.
Where will all these planes be based and how can the Chinese infrastructure, which is already hard pressed, be able to cope with this.
All these aircraft basically also mean that there will be a massive increase in belly capacity on a regional basis.
Will the large players grow their cargo fleets even further?
Air China Cargo is spreading its wings even further and becomes a dominant player outside of China.
The recent joint venture agreement entered into between Air China and Lufthansa in the MOU issued is officially referred to as “an enhancement of both carriers commercial partnership.”
Where does that start, and where does it end?
The idea is the forming of a new commercial joint venture between the two mighty carriers.
Will this eventually also mean that both airlines will jointly utilize not only their passenger cabins, but also the complete belly space on offer?
If so, then what need for further investment in freighter aircraft?
Another interesting aspect is that Chinese carriers, who have traditionally had their trunk routes to and from the USA and Europe, are now putting much more emphasis on Africa.
Chinese investment in the African continent is seen to be far higher than what they invest in Europe.
Trade between China and Africa has quadrupled during the past ten years and it seems there is no end to Chinese investment there.
No wonder! - Africa holds massive reserves of raw materials which are essential for China if they are to hold their present economic position.
China Southern, based in Guangzhou, recently announced that it will use Mauritius as its launching point for further African expansion.
Africa is on many of these carriers plans for regular services and Hainan Airlines has even formed its own Ghanaian offshoot, called Africa World Airways.
Back home in China, passenger traffic booms and it seems that there is a distinct shift in which cargo airports are going to be future forerunners.
Shanghai is said to be on somewhat of a losing streak as far as cargo goes, with Chengdu, Chongqing and Zhengzhou having established themselves as “own hubs.”
Zhengzhou, the home of the Apple i-Phone, is served directly by Cargolux in their joint venture with the regional government there. Another major carrier serving the Henan capital is AirBridge Cargo.
Air freight handled there in 2012 is said to be up by over 40%.
Why the shift?
Simply maybe as wages and general costs on the east side of China have exploded and this is not yet the case in the central and western part.
Also, why drag cargo produced in western regions of China over to SHA if you can move it directly?
Interesting to note is that the above mentioned three cities have overtaken Shanghai as Cathay Pacific‘s main cargo market.
Plenty of movement in China
Even despite economic turn downs, the economy will expand faster and faster, resources will be placed in areas which make more economic sense and maybe the Boeing and Airbus prognosis will become reality.
John Mc Donagh