Industry Overview
After more than ten years of double-digit annual growth, China has emerged as the world's second largest aviation market.
Driven by rapid economic growth and increased demand for air travel, China hopes to build 42 more airports by 2010. If it does, China will have 186 airports, including 3 national hubs, 7 regional hubs, 24 medium hubs, 28 medium-sized airports and 124 small-sized airports. The number of airports serviced by scheduled airlines will approach 260 by 2015. The commercial air fleet will grow along with the number of airports, up from the current 1100 aircraft to an estimated 1,600 by 2010. It is forecasted that the Chinese aircraft fleet will increase four times, reaching about 4460 planes by the end of 2026.
The General Administration of Civil Aviation of China (CAAC) is making efforts to rationalize the country's airlines. It has completed mergers with the "Big 3" (Air China, China Eastern and China Southern) and China's smaller, less profitable airlines. The CAAC is concentrating on expanding the number of smaller, single aisle aircraft while phasing out additional wide-body, twin aisle aircraft in the Chinese fleet. CAAC expects the new airlines to improve operating efficiencies and concentrate on developing a modern "hub-and- spoke" air routing system.
At present, CAAC is drafting the 11th Five-Year Plan and 2020 Vision for the aviation industry. It is expected that the average annual growth rate will be 11% for the following decage. By 2010, the total turnover will be 10 billion ton/km; the annual growth rate for general flight will be 10% and the total general flight volume will be 140,000 hours.
U.S. Position in the Market
China is a developing country building infrastructure in virtually every area of its economy, including telecommunications, roads, ports and rail. Competitive financing can be a major barrier to success for U.S. firms. The Chinese are sophisticated at playing one competitor against another. While CAAC thinks highly of U.S. products and services, competition continues to be fierce. Political issues between our two countries often have a strong influence on U.S. sales, especially of aviation equipment.
