Chinese aviation: Ascent of the dragon

27 Feb 2017 by Valerian Ho
China Southern's Airbus A380

Let’s start with a few numbers: in 2015 outbound travel from China reached 120 million, and Chinese travellers heading out to explore the world are predicted to number 200 million by 2020, according to figures quoted by Travel Daily China in a presentation at ITB Asia 2016 in Singapore. Factor in the explosion of domestic air travel, as booming business in the Middle Kingdom creates a new middle class of between 300 and 400 million people, and it will come as no surprise that the International Air Transport Association (IATA) expects China to displace the US as the world’s largest aviation market by 2025.

The latest figures from the Civil Aviation Administration of China (CAAC) reveal that the Chinese aviation industry transported 436 million passengers in 2015 – an 11 per cent increase on the previous year. However, the forecast is for an incredible 817 million additional passengers over the next five years, bringing the total to around 1.3 billion annual passengers by 2020.

The major driver comes from domestic travel – of the 3,326 routes operated in China in 2015, 2,666 were internal. However, there’s an increasing appetite for international exploration, with the outbound Chinese market being targeted heavily by everyone in the travel and hospitality industry.

Over the past two decades the country has transformed its aviation offering, with the number of airlines doubling to 48 and rapid growth in route networks. Today nearly every second- and third-tier city in China has an airport – with some boasting more than one.

Yet with airports and airspace already approaching saturation point, as evidenced by the notorious flight delays and cancellations that already create chaos and confusion in departure halls, it’s a race against time to implement the infrastructure needed to cater for the staggering projected growth.

Beijing Daxing International Airport

Airports – New and improved

In its 13th Five-Year Plan (2016-2020), the Chinese government announced its aim to develop the aviation sector, focusing on improving passenger experience and preparing for increased mid- to long-haul international routes. As part of this brief, the target is to build an additional 20 airports across the country by 2020, bringing the total to 260. Last year saw the completion of a number of new facilities in Shandong, Guangdong, Yunnan and Qinghai provinces, with many more under construction.

Arguably the most important is the new RMB80 billion (US$11.7 billion) mega-airport being constructed in the south of Beijing. Despite already having two airports – Beijing Capital International Airport and the smaller, more domestic-focused Nanyuan Airport – the situation is already at breaking point. Although the former is the second largest airport in the world, with a maximum capacity of 83 million passengers, in 2015 this had already been exceeded, with almost 90 million passengers passing through.

Scheduled to open in 2019, the new international airport will be located in the southern Daxing district, positioning it closer to the city centre. Its immediate operating capacity will be around 45 million passengers, expanding to 72 million by 2025 with an ultimate capacity of 100 million – which by current standards would make it the biggest airport in the world.

The futuristic facility was conceived by airport design experts ADP Ingénierie – a wholly-owned subsidiary of Aeroports de Paris. The centralised, single-terminal concept is shaped like a hand, with each of the five “fingers” housing boarding gates. The compact design means the farthest gate is just an eight-minute walk away, while travellers will also have easier access to facilities such as shops and ground transport.

The runway design aims to minimise delays, with four runways (a total of seven are planned) due to be operational immediately: “At major airports around the world, aircraft often have long taxis to get to their assigned runways, which is wasting time. Our new runway design allows flights to take off quickly after the gate closes, thus solving some flight delay issues,” said Zhu Wenxin, spokesperson for the Beijing New Airport Construction Headquarters.

Meanwhile, in Chengdu, the capital of Sichuan province, a second airport is being constructed to serve the “gateway to western China”. Increasingly a crucial transport hub for the southwest, as well as a major contributor to the region’s economic development, Chengdu is a natural choice for investment – and it has come in the nick of time.

The existing Chengdu Shuangliu International Airport has a maximum capacity of 50 million, though passenger traffic is already close to surpassing this, with 62 million passengers expected by 2020. Built to be “future-proof”, the new RMB72 billion (US$10.5 billion) Chengdu Tianfu International Airport will have six runways and a capacity of 90 million, and will be located in the Yanghua district, an hour’s drive from the city centre and within easy reach of Chongqing to the east via planned road and rail link-ups.

“The new airport will promote Sichuan’s integration into the ‘Belt and Road Initiative’ and the ‘Yangtze River Economic Belt’, helping the province to further open up to the outside world and make economic breakthroughs,” said Tang Liangzhi, Chengdu’s mayor.

Other major new aviation construction in the works includes a new international airport in Xiamen, scheduled to open in 2020 on Dadeng Island to the north of the city centre with capacity for 70 million travellers. Qingdao on the northeast coast is also currently building a new four-runway airport – due to open in 2025 – that will accommodate large aircraft including A380s and B747s and cater to up to 55 million passengers annually.

Brand-new airports aside, a slew of extension projects at existing airports are also under way, with municipal authorities finding relatively cost-effective ways to increase capacity with new terminals. In 2013, Shenyang Taoxing International Airport welcomed a new international terminal, the 248,000 sqm facility adding 30 bays and cementing its position as a crucial air hub for northern China.

Meanwhile, Chongqing Jiangbei International Airport is expected to complete work on its 53,700 sqm Terminal 3A by the middle of this year. The four-storey building will have nine check-in areas and follow the modern international trend for automation with 32 self-service kiosks that can print boarding passes and check in luggage.

In the south on Hainan Island, Haikou Meilan International Airport also began construction of a new terminal last year. The RMB15.3 billion (US$2.2 billion) project is expected to be ready by 2019 and will have the largest airport duty-free offering in China, plus 61 new bays and 110 check-in counters. The upgrade will see the airport’s capacity increase to 35 million travellers annually.

Airlines – Spreading their wings

As already mentioned, China has an impressive 48 passenger airlines now in operation – even more striking given the fact that the oldest airline still in existence today only launched 33 years ago (see timeline). Whilst the majority of these focus on the domestic market, there has been a marked trend towards purchasing long-haul and larger aircraft, and developing international routes, which shows the Chinese airlines are eyeing up the global market and actively positioning themselves to compete with foreign carriers on an international scale.

The big three

Air China, China Eastern and China Southern, the country’s “big three” airlines, have built the most comprehensive air networks in China, covering all major cities and developing areas, as well as reaching out to international destinations.

In its 2015 annual report, national carrier Air China stated its total income as RMB109 billion (US$15.9 billion), and it currently serves 40 countries and 174 cities, including 68 international destinations. It became the first Chinese airline to fly to six continents with the launch of flights to Johannesburg in South Africa in 2015.

The carrier has also been making rapid fleet upgrades both to improve passenger experience and strategically position itself for further expansion. Last year it welcomed its first B787-9 Dreamliner, featuring larger windows, modern LED lighting, higher humidity and lower cabin pressure. “We believe the B787-9 will become the backbone of Air China’s international long-haul routes, and will play an important role in supporting Air China’s international development strategy,” said Captain Wang Yingnian, chief pilot of Air China. The airline has a total of 15 Dreamliners on order.

Meanwhile, China Eastern’s annual income figures look enviably healthy, increasing from RMB40 billion (US$5.8 billion) in 2008 to RMB100 billion (US$14.6 billion) in 2016, with passenger traffic jumping by 2.5 million from 12.8 million in 2014 to 15.3 million in 2015. The carrier has launched 21 new international routes since 2013, with destinations as geographically diverse as Chicago, Amsterdam and Brisbane.

Fleet upgrades include the retrofitting of its B777-300ER aircraft with new first, business and economy seats, while the airline has also placed an order for 20 A350s and 15 B787s. China Eastern plans to operate the new Dreamliners on routes between China and North America – the airline looking to bolster its transpacific network as this remains a major market.

Employing new-generation planes is a key strategy for China Eastern. “The introduction of the A350 XWB will play a very important role in promoting our operational capability, profitability and service brand on our international long-haul routes, and opening a new chapter in the international development of China Eastern Airlines,” said Liu Shaoyong, the airline’s chairman.

Last but not least, China Southern lays claim to being the first airline in the world to operate both the A380 and B787 at the same time. In fact, China Southern has the largest fleet in Asia and placed fourth in the world in IATA’s 2016 rankings.

Over the coming five years, China Southern will continue to strengthen its fleet by purchasing new aircraft types such as the B787-9 and B737 MAX. By 2020, its fleet size is projected to increase to 1,000 aircraft, and it expects to carry 168 million passengers annually.

The airline now flies to 49 international cities after launching routes to Toronto and Adelaide last year. Coming soon, it has plans to begin a South American service, flying to Mexico City via Vancouver, while direct services to Cairns and Frankfurt are also on the cards.

Headquartered in Guangzhou, China Southern is also expecting to benefit from recent developments at Guangzhou Baiyun International Airport, which opened a third runway in 2015 and has a second terminal scheduled to open in February 2018. This expansion, combined with the 72-hour visa-free option implemented to entice transit passengers, should encourage international travellers to use Guangzhou as a transit hub.

Dark horses

While the “big three” have dominated thus far, a handful of airlines are expanding so aggressively that they may well soon challenge the status quo. Hainan Airlines and Xiamen Air in particular have grown quickly in terms of fleet size and aircraft models, and have already expanded their route networks to the US and Europe.

Owned by massive conglomerate HNA Group (which also has a stake in some other airlines, including Virgin Australia), Hainan Airlines has seen major investment and rapid growth. The jewel of the fleet was introduced in June last year – a B787-9 with 30 “Super Diamond” business seats and 259 economy seats. The new aircraft features modern passenger comforts such as free onboard wifi service and Panasonic’s eX3 IFE system boasting 60 Hollywood movies, 90 TV programmes and 750 music albums. Business class passengers can look forward to Bulgari amenity kits and Bose noise-cancelling headsets.

The latest Dreamliner will be deployed on US routes such as Las Vegas after familiarisation is completed, as well as on Hainan Airlines’ newest services to cities such as Tel Aviv and Manchester. With expansion plans targeting Europe and the US, the airline is currently in the process of applying to fly to London, New York and
Los Angeles.

Until recently, Xiamen Air’s business model focused solely on the regional and domestic markets. However, it took an important step in 2015 with the delivery of its first B787-8, which it deployed on its inaugural continental route to Amsterdam. The carrier continued to expand with a service to Sydney in the same year, followed by routes to Melbourne, Vancouver and Seattle in 2016 and New York in 2017. It now has six three-class B787-8s offering first, business and economy seating, along with the newer B787-9.

“Xiamen Air is changing from what it used to be and looking for new development,” said airline president Che Shanglun. “By 2020, we expect to expand our fleet to 268 aircraft, with an annual passenger capacity of 50 million, and profits exceeding RMB50 billion [US$7.3 billion]. We aim to become a top Asia-Pacific airline, and break through into the top 20 of the aviation market.”

Sichuan Airlines too is eyeing a share of the global market, and now flies to cities such as Sydney, Vancouver and Los Angeles. Not to be outdone, Tianjin Airlines launched services to London Gatwick and Auckland last year, and is planning to link Tianjin up with Melbourne later this year. Beijing Capital Airlines is also interested in reaching the UK market, announcing plans to serve Birmingham starting this summer, while Shenzhen-based Donghai Airlines also finalised an order for 25 B737 MAXs and five B787-9 aircraft last July, showcasing ambitions to create a modern, high-quality fleet with long-range potential.

Budget boom

The low-cost carrier (LCC) market is also poised for a meteoric rise in mainland China. Spring Airlines – China’s first LCC – took off in 2005 and is already a mature and stable business, with international services to Asian cities such as Tokyo, Bangkok, Singapore and Seoul.

In 2013, recognising the success of the budget market globally, the CAAC began to actively encourage this strategy. The result was a flurry of new arrivals, bringing the current total to seven carriers. This includes the establishment in 2013 of Ruili Airlines and in 2014 of 9air, the Guangzhou-based subsidiary of Juneyao Airlines, as well as the conversion of China United Airlines into a low-cost carrier.

The growing importance of Chinese LCCs was also underlined in January 2016 with the creation of U-Fly Alliance – the world’s first LCC coalition. Three of the four founding members are based in mainland China (Lucky Air, Urumqi Air and West Air), with HK Express also part of the network.

However, there is plenty more room for growth. According to OAG, the low-cost sector accounted for just 7 per cent of China’s domestic air travel market in 2015 (as compared to 56 per cent of Southeast Asia, 40 per cent of Europe and 32 per cent of the US), and this is expected to double by 2020.

Made in China

A major watershed moment in China’s aviation history came last year, when the first ever Chinese-produced commercial passenger jet began to operate flights. The state-owned Commercial Aircraft Corporation of China (COMAC) was founded in 2008 to develop a regional jet programme, with serious intentions to rival Airbus and Boeing in the future.

In June last year, Chengdu Airlines received the first ARJ21 aircraft – a short- to medium-haul aircraft with 78 seats in two classes. The maiden flight from Chengdu to Shanghai took place later that month, and the airline has 30 ARJ21s on order.

COMAC’s latest model is the C919, a narrow-body aircraft with up to 168 seats, which entered the flight test stage in February. So far, the manufacturer has received 570 orders, with China Eastern set to become the first airline to operate the model once it is ready. Given the speed and voracious appetite of China’s aviation industry players, it’s a fairly safe bet that more aircraft models will follow, probably designed to be bigger and with longer range capacity. China is looking out on the world… and its gaze is far reaching.

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