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Air China

Mainland carriers' future up in the air

PUBLISHED : Monday, 25 June, 2012, 12:00am
UPDATED : Monday, 25 June, 2012, 12:00am

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The sky is not the limit for air traffic growth on the mainland despite phenomenal growth in passenger and plane numbers in the last decade.

Air passenger volume hit 300 million last year, more than tripling over the past decade - even with the 2003 Sars outbreak and the financial crisis five years later.

Mainland carriers nearly tripled the size of their combined fleets, from 602 aircraft in 2002 to 1,764 at the end of last year.

By 2015, passenger volume is projected to reach 450 million while the commercial aircraft fleet is expected to number 2,750, according to the central government's 12th five-year plan. That would make China the biggest inbound tour market and fourth-largest outbound market in the world.

But turbulence may be ahead. Despite the growth spurt in the past decades and equally encouraging projections, energy issues may well be a spoiler, a researcher at the China Communications and Transportation Association warns.

'If the number of aircraft reaches a certain level, let's say, 15,000, they will need some 150 million tonnes of jet fuel annually,' association executive vice-president Wang Derong says.

'It will definitely upset the energy policy of China, which wants to diversify its energy mix to clean energy.'

Fifteen thousand planes will burn up to 132 million tonnes of jet fuel a year, which, in turn, will require nearly 1 billion tonnes of crude oil to be refined. Last year, the mainland imported just a quarter of that projected jet fuel consumption.

The number of aircraft operated by mainland airlines will reach somewhere near 9,000 by 2030, based on the projected air traffic growth calculated by the Civil Aviation Administration of China (CAAC). Air passengers will reach 700 million in 2020 before doubling to 1.5 billion in 2030.

To put that into perspective, that means one plane for every 150,000 people, compared with one per 50,000 in the United States. But Wang said China would in no way match America's aircraft density, so Beijing should expand the nation's high-speed railway network, which could be powered by hydraulic, solar or nuclear energy.

For the next 10 years or so, he said, civil aviation would continue to enjoy double-digit growth, fuelled by the ongoing industrialisation and income growth on the mainland.

To cater for this growth, the CAAC has earmarked 425 billion yuan (HK$521.99 billion) for airport expansion in the five years to 2015, including building 56 new airports, relocating 16 and expanding 91.

The expansion plans include building a second airport in Beijing, fourth and fifth runways at Shanghai Pudong International Airport.

Many of the projects need to tap the debt markets just as the mainland's financial market faces a credit crunch. To add to the woes, around 70 per cent of the existing 175 airports run at a loss. This had made bankers wary of approving fresh loans, an airport consultant said.

Many airports are also underutilised, leading to poor returns on investment, according to Eric Wong, former chief executive of Hangzhou Xiaoshan International Airport. He said there weren't enough small aircraft - those with seats under 100 - to cater for small airports on the mainland, leading to the low utilisation rate. The daily flight between Hangzhou and Wenzhou was terminated because the airline concerned was struggling to fill the 120-seater it operated on the route. Smaller aircraft could effectively tap passenger demand because they enabled airlines to fly more often and provide more choice, Wong said.

'Overall planning on aircraft mix should be part of the master plan of airports and fleet expansion nationwide if the regulator wants to see airports in the black,' he said.

Uneven distribution of passenger volumes across airports leads to bottlenecks in major airports and severe flight delays. Only 53 of the 175 airports on the mainland get more than 1 million passengers a year.

The problem of flight delays has also intensified because of air space constraints. Some 80 per cent of the country's air space is controlled by the military, to which civilian carriers must give way.

Pilot shortage is yet another drag. Domestic airlines needed about 3,000 new pilots every year while the country's training schools could supply only 2,000, analysts said.

But the most pressing issue is how to balance development and environmental protection. With airlines worldwide promising to have carbon-neutral growth by 2020 and halve their carbon footprint by 2050, mainland airlines are under even greater pressure as they are among the fastest growing in the world.

Hopes are now pinned on the second generation of biofuels, which is derived from non-food plants. Once planes can fly free of the shackles of fossil fuel and the fear of energy safety, China's aviation sector would be able to reach its true potential.