Monday Insight – June 10, 2019

Before We Start This Week

More Speakers Announced… Pre-Summit Workshop Program To Be Announced This Week

Special Early Registration Ends June 15…


The New China Air Transportation Market

The Dragon Is Evolving – And It Does Affect The US

Our Airports:China™ forecasts now indicate that by the 4th quarter of next year, China will overtake the US as the world’s #1 air traffic market.

No Real Fortress Hubs – Yet. In the last ten years, China has been growing an a 10%+ annual rate. Within this, there are airports that have grown over 300%, and airports that opened new with zero traffic and now exceed 250,000 passengers. There is no comparison with the US market, in size, scope or structure.

One of the most pertinent aspects of the China air traffic system and that of the US is that China has no true US-style connecting hubs. The traffic demand is such that O&D fills just about all flights, with little excess capacity to allocate for connecting passengers.

In 2018, the national load factor was 84%, and that encompasses several dozen “smaller” airports (under 3 million passengers) that experience load factors in the 60% range.

Further, China is mostly a mainline aircraft system. While China has its own turboprops (the MA-60, MA-600), very few are operated in China – it’s mostly big iron.

To get an idea of the sheer O&D demand that Chinese cities now generate, for full year 2018 Airports:China™ and Airports:USA® compared the top five US O&D airports (excluding connecting passengers – a metric that includes airline-generated traffic which has nothing to do with locally-generated O&D) with that at the top five Chinese airports:

Note that the #1 US O&D airport – Los Angeles – handles fewer O&D passengers than the #12 airport in China.

China Isn’t In A Recession – But The Boom Is Slowing. The indications are clear – regardless of any trade issues with the US – that China is now in, and will see, a slowing economy. Airports:China™ now indicates that the waves of Chinese tourists to the US will continue to moderate in the next two years – a radical change from projections of just a year ago.

The reason is that several economic bubbles in China have deflated… real estate being one. More to come… there are factories closing. Coal mines wilting. Steel mills slowing down. Some “development zones” turning out to be construction boondoggles. All that eventually results in less disposable income.

Latent Domestic Travel Demand Is Far From Met – Downturn Notwithstanding. That much understood, however, the latent domestic air travel demand in China is such as to absorb significant economic decline. Even economically-downsided areas such as rust-belt Shenyang are still seeing growth.

For the US, there will be a material change in the structure of China-US travel.

Increasingly, the leisure visitor traffic – which will still be over 3 million and slowly grow – will increasingly be comprised of business and high-end FIT travel. These have very different and more demanding travel needs. The leisure travelers are shifting also. FIT travelers want to see more of America, not just tourist points. It’s one reason that China-Hawaii traffic is weak – Hawaii is a great destination, but it exposes travelers to just one US experience.

The shifts will be material. While the total spend per visitor will decline – we estimate by more than 50% to under $3,000 – the business and investment importance of the emerging and future Chinese visitors to the US will replace this in the form of economic investment and impact. Different economic outreach and communication will be needed.

New Channels Are Opening. So Dump That Insulting Machine-Translated Website. Don’t get too sidetracked in all this smoke about trade disputes – China still needs the US market – desperately. There is no market replacement. Investment will continue, but communities and airports need to re-think the often veneer modalities in approaching Chinese businesses.

At the 24th International Aviation Forecast Summit, we’ll be hosting two very incisive sessions on the new China opportunities.

We are honored to have a pre-Summit Sunday afternoon Workshop hosted by Tencent… China’s largest internet and digital company, with global sales of over $40 billion. This includes the most widely used communication channel in the world, WeChat.

Tencent and our partner, IM2China, LLC will be outlining a new and very cost-effective product that will easily connect small and medium airports with over 500 million consumers in China, and make it easier for business travelers to use the local airport. For airports that still are using sloppy machine-translations of their English website, this is the answer.

And at the Summit itself, the Airports:China™ session is titled “Attracting The New Dragon – China Opportunities for US Airports & Communities.”  They days of “trade missions” to China are being replaced by more direct and effective ways of attracting Chinese investment… and we’ll be covering them.

This is in addition to the exciting presentations from over 22 airline CEOs and senior executives, not to mention finding the latest on the effects of new fleet changes, and, naturally, our exclusive Airports:USA® enplanement and trend forecasts.

If you haven’t registered – do so now, as the special early rate ends on 15 June. Click here for details.