Chinese aviation sector flies into 2016 on record profits

China’s aviation industry is coming to the end of its most profitable year in history and is headed for a 2016 that will see more new airlines formed and new international routes added as the sector stands out as a bright spot in the mainland’s slowing economy.

The industry turned in a total profit of 54.8 billion yuan (HK$65.7 billion) in the first 11 months of the year, up 76.2 per cent year on year, according to the Civil Aviation Administration of China’s annual work meeting late last week. Low oil prices have helped the industry save on its biggest single cost and further stimulate demand with lower ticket prices, despite the yuan’s sharp devaluation in the second half eating into airlines’ bottom lines.

The top aviation regulator said passenger traffic had grown by an average of 10.4 per cent a year for the past five years, with the industry’s accumulated total profit for the five years reaching 180 billion yuan – more than triple the amount in the previous five years. China’s commercial fleet has grown by

1,047 planes to 2,645 planes in the past five years, while the number of airlines increased from 45 to 54.

Several start-up airlines formed this year are expected to start flying in 2016, including Colourful Guizhou Airlines, Hongtu Air and Guilin Air, which were ushered in by the CAAC’s lifting of a seven-year-long moratorium on airline licence applications in 2013. As the licence review process lasts two years, more new names are expected to hit the market next year.

Industry insiders say “several dozen” companies are queuing up for air transport licence applications, and that the number of aircraft leasing companies is also ballooning, as both the outlook for the industry and a “prestige effect” associated with being in the plane business are drawing more companies into the sector.