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China slowdown a temporary blip for airlines?
June 1st 2016
Concern about China’s slowing economy and its impact on Asia-Pacific aviation is the subject of daily industry analysis. Read More »
In the region and across the globe, particularly in North America and Europe, airlines have been increasing capacity into major Chinese metropolises and more recently, launching routes to the country’s secondary cities.
In the last 18 months, China, whose economy is the second largest in the world, has halved its official annual GDP rate to 6.9%.
Even this forecast is considered by many industry analysts to be optimistic. They say that a severe economic downturn on the Mainland could cut back airline traffic growth in this very important market for airlines across the region – and the world.
Whatever the true numbers prove to be, it is becoming clear that China’s slowing economy is having an impact on Asia-Pacific airline traffic growth, although mostly in the premium cabin. It is not yet dramatic, but it is there.
It would be premature, however, for airline managements to “over-worry” about China and the state of its economy. The nay sayers aside, global monetary institutions and several economic think tanks do not believe there will be a hard landing for the Mainland economy.
China’s GDP growth is still well ahead of almost every nation on the planet. And while the Mainland’s speculative and manufacturing sectors of the economy may be in trouble, the same situation does not apply to the travel and tourism industries. They are more robust than ever.
In 2016, annual air traffic growth in China is maintaining its double digit expansion and the nation’s airlines are continuing to grow, both domestically and internationally. So a collapse in Asia-Pacific air traveller numbers into China seems unlikely, especially as regional passenger growth is predicted to have an average annual expansion rate of around 5%.
Another set of figures also should be considered when assessing the health of aviation in the region. India is recording annual passenger expansion of 20% a year and recently overtook China in air traffic growth.
Further south, Indonesia is the third largest economy in the region. Southeast Asia, when taken collectively, is almost as large as the Chinese market.
So while it is important for airline managements to closely monitor China’s economic performance, they also know that one airline market, no matter how big, does not solely prescribe their growth.
There may be some be bumpy times ahead for airlines in the short term, but the long term issue will be who wins the biggest share of the 1.76 billion Asia-Pacific passengers forecast to take an airline journey in 2035.
