Protectionism threatens China’s rise to become world’s biggest air market by mid-2020s, global aviation body warns

  • 8.2 billion travellers will take flight in 2037, with 1.6 billion from China
  • Asia-Pacific to continue to drive future growth, accounting for more than half of total new passengers over two decades
PUBLISHED : Thursday, 25 October, 2018, 11:58am
UPDATED : Thursday, 25 October, 2018, 11:58am

Curbs to free trade could undermine China’s rise as the world’s biggest air travel market – set to overtake the US by the mid-2020s – the aviation industry’s global body has warned, amid an intensifying dispute between Beijing and Washington.

According to the International Air Transport Association (IATA), the latest data projected for 2037 signalled a clear shift in travel towards Asia.

“We are seeing a geographical reshuffling of world air traffic to the East. And secondly, we foresee a significant negative impact on the growth and benefits of aviation if tough and restrictive protectionist measures are implemented,” said Alexandre de Juniac, IATA’s director general and CEO.

Sliding into protectionist mode would risk 100 million jobs and US$5.5 trillion in economic output over the next 20 years, IATA said.

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About 8.2 billion travellers will take flight in 2037, up from the 7.8 billion in 2036 forecast last year. Of the revised number, China will have 1.6 billion people flying in two decades, up by one billion. In contrast, the United States will have 1.3 billion travellers then, compared to the near half a billion today.

The Asia-Pacific continues to be the region underpinning much of the industry’s future growth. More than half of the total new passengers over two decades will originate from that part of the world. Robust economic growth, contributing to people becoming richer, and “favourable” population and demographic profiles would aid the growth of air travel in Asia, IATA said.

China is expected to supersede the US as the largest air market – defined by passenger travel to, from and within the country – around the middle of the next decade. India will leap from seventh in 2017 to third 20 years later, and Indonesia will rocket from 10th place to fourth in the same period.

Last year, IATA estimated China was expected to surpass the US in 2022, but a resurgence in affordable air travel means that milestone is likely to take a few more years to reach.

At the annual gathering last week of Asia’s airlines on Jeju Island, South Korea, the regional aviation body, whose members include Cathay Pacific Airways and Singapore Airlines, issued warnings that trade disputes could hurt airline profits and hit consumer confidence.

Andrew Herdman, director general of the Association of Asia Pacific Airlines, noted that despite the expected negative impact, the industry was in fact receiving a last-minute “boost” at this time because of customers moving goods to stay ahead of deadlines and new tariffs.

“The concern is the trade picture: whether it will affect trade flows and business confidence,” Herdman said. “Everyone has been watching the rhetoric ramp up on trade disputes. [It’s] not good for trade.”

No take-off imminent for China’s aircraft sector

The International Monetary Fund has cut global economic growth to 3.7 per cent, down 0.2 percentage points, reflecting the sentiment over the US-China trade spat.

Herdman, a former Cathay Pacific executive, said infrastructure remained “a big challenge” in Asia to keep up with the pace of growth. Of the 42,000 new planes needed by 2037 forecast by Boeing, 40 per cent are destined for Asia.

The biggest warning by IATA was reserved for the anti-free-trade agenda surrounding Britain’s exit from the European Union, which looks increasingly likely given that a no-deal Brexit could be realised in six months. That would threaten chaos for travellers in Europe, including airports left in disarray and planes that might not be able to fly between Britain and the continent.