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China'S Regional Aviation Lost Eighteen Years: The Percentage Of Aircraft Dropped From 16% To 5%

2019/12/10 20:35:00 0

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"In the past few years, I have changed several branch airlines, and the upstream and downstream companies are very difficult to do. Is this the market where the market is really out of order?" In December 6th, after the Fifth China Civil Aviation Branch aviation forum ended, Liu Li (a pseudonym) grabbed the newly concluded speech at the China Civil Aviation cadre management college professor Li Guijin urgently asked.

"The market is really bad in recent years, but I believe it will be better in a few years. Do you want to hold on to it again?" Li Guijin replied.

On the same day, Li Guijin pointed out at the forum that the development of China's regional aviation market has not been satisfactory for many years. Over the past eighteen years, the share of the regional aircraft in the total civil aviation aircraft has dropped from 16% to 5%. Most of the large airports have less than 5% of the total branch flights, especially the three major hub airports in North China. The proportion of branch flights is even less than 1%, indicating that the current market situation is not optimistic.

Li Guijin's speech resonated with the upstream and downstream companies in the regional aviation market. "Sales in recent years are far from ideal." Guo Qing, China's vice president of Brazil aviation industry group, told the twenty-first Century economic report that the days were tough.

Feeder aviation "not enter and reverse"

"The first outstanding feature of China's branch line operation is the small size of the feeder airports, which has slowed down in the past five years." Ding Ping, assistant general manager of Tianjin airlines, said that the 169 branch airports in 2018 accounted for 71.91%, representing a decrease of 4.32 percentage points compared with 2014, and 86 million 843 thousand and 600 passenger trips, accounting for only 6.87%, down 0.42 percentage points from 2014.

In the past 2014-2018 years, the composite growth rate of the number of feeder airports was 2.35%, lower than the composite growth rate of the whole civil aviation, and the compound growth rate of passenger throughput was 9.42%, which was also lower than the average level of the whole civil aviation.

Not only is the development of the feeder airport slowing down, but the size of the feeder fleet is also shrinking. As of September 30th, China's mainland airlines operated 3583 airliners, including 451 wide body airplanes, 2943 narrow body airplanes, 189 regional jet liners, and 5.27% regional jet liners. At present, 10 companies are operating in the branch market, and the competition is fierce.

It is worth pointing out that even the ten airlines in the operation branch market have insisted on only two flights with feeder aircraft, while the remaining eight have turned to the airlines which are combined with trunk lines and branch lines in different degrees. The direction of development is significantly different.

Shen Feng, deputy secretary of the Yunnan Civil Aviation Safety Supervision Bureau, said that in the past 30 years, China's civil aviation transport business has been developing rapidly. The number of civil aviation lines has increased from 191 vehicles in 1986 to 3615 sorties in 2018, with an annual growth rate of 9.7%, far exceeding the 2.2% growth rate of the United States in 40 years. However, the growth of China's regional aircraft has been very slow, and the number of 150 flights has increased by only 150 in the 30 years. Of the more than 300 aircraft imported each year, the number of single channel aircraft is close to 80%, while the percentage of feeder aircraft is very small.

Li Guijin pointed out that eighteen years ago, there were only more than 500 aircraft in the civil aviation sector, and 16% of the regional aircraft accounted for about 5%. It can be seen that in the past more than 10 years, China's civil aviation industry has been leapfrogging upgrading and development, but it is a lost ten years for the regional aviation market.

There are peaks and troughs in any industry. Liu Li and others entered the regional aviation market, which is a great potential.

On the one hand, in the European and American markets, the proportion of regional aviation is quite high, generally accounting for 20%-30%. According to relevant data, in 2018, the total number of American regional aircraft was 2174, accounting for 55% of the total number of regional feeder aircraft, 2.5 times that of Europe, and 4.5 times that of Asia. On the other hand, with the support of national policies, the number of domestic feeder airports has also increased steadily. As of 2018, the number of domestic feeder airports reached 169, accounting for 72% of the total airports in the country. With the development of domestic economy, people in more remote areas are willing to travel by air.

Why is the development of regional aviation so unsatisfactory?

"We encountered many bottlenecks in the operation of branch line." Ding Ping told the twenty-first Century economic news reporter that the cost of the acquisition of regional aircraft is high. Through calculation, we can see that the branch aircraft purchase tax is 4.2 percentage points higher than that of a large aircraft. In addition, the domestic demand for feeder aviation is the same as that of a trunk line aircraft, for example, drivers must have two people, and the airport fees are also the same. It is no wonder that many airlines use B737 aircraft or A320 aircraft to fly the feeder routes. The cost is so high that they lose more.

In addition, although the National Civil Aviation Administration and the Ministry of finance have many supportive policies, such as subsidies for small and medium airport routes, the civil aviation authority has just announced the subsidy policy in 2020, and 49 airlines will receive 1 billion 100 million civil aviation branch aviation subsidies. However, some civil aviation personages have pointed out to reporters that these subsidies are supplementing according to the route, and do not subsidize aircraft models. Therefore, some economic branch models are not included, such as Ba hang E190 and E195.

"Some airports also restrict the entry of some (feeder) models." Ding Ping disclosed that the route between the feeder airport and the hub airport was insufficient, because the hub airport was particularly tense at the moment, especially the tens of millions of airports.

Li Guijin also had this experience. He told the economic news reporters in twenty-first Century that the proportion of the main hub airports in China is very low at present, for example, BeiJing Capital Airport has a daily flight volume of 1576 classes, with only one regional flight number, accounting for 0.06%. Shanghai Pudong Airport daily flights are also up to 1291 classes, there is only one regional airline flights, accounting for 0.07%, Shenzhen airport daily 961 flights, there are only 1 regional flights, accounting for 0.15%. Among the top ten airports in the country, there are only a few flights of Guangzhou Baiyun Airport and Xian Xianyang Airport. There are 46 regional flights in 1297 flights per day at Baiyun Airport. There are 44 regional flights in 965 flights per day at Xianyang airport, accounting for 3.55% and 4.59% respectively.

Ding Ping also revealed that the infrastructure of the feeder airport is weak, with many restrictions and high operational risks. For example, many cities are already snowing, and the feeder airports do not have the ability to remove ice, which also limits the power of the airline to open routes to these feeder airports.

Due to various problems, the willingness of many airlines in China to make their own branches gradually diminish. Some of the companies originally positioned as feeder airlines have begun to shift to the combination of dry and tributaries. Tianjin Airlines is one of them.

Look forward to CPA mode?

Even though a lot of branch aviation has been transformed, fortunately, there are also those who stick to it, such as China Airlines. Huaxia Airlines insiders admitted to reporters that the company still focused on the branch aviation market, but the branch line was not good enough, and the company had many difficulties in its operation. The most important thing is not being able to get support from big airlines.

According to the idea of Hua Xia airlines, it hopes to bring passenger flow from the extensive branch market to the hub airport or the big city airport, and then through the code sharing and cooperation with the trunk airlines to realize the fast access of the feeder cities and the central cities, and form a wider coverage of the national regional aviation network.

But this desire has only recently been supported by individual airlines. "The days of big airlines are so good that they do not want to do the branch market and innovate." Li Guijin said that with the economic downturn, the development of the aviation market is slowing down, and the four major airlines in China will begin to pay attention to the development of capillaries, which will bring opportunities for the development of regional aviation.

This view has been recognized by China Southern Airlines. Some people from China Southern Airlines revealed to the twenty-first Century economic news reporters that China Southern Airlines began to study the new operation mode several years ago, considering the implementation of the power purchase agreement to drive the next stage of development.

"It is generally considered that the 1000 aircraft is the size of the aviation industry. If we have more than 1000 aircraft, if the management level and technology level can not be improved, the scale is often uneconomical." Wang Zhiyong, a senior civil aviation officer, told reporters that the size of the fleet of the three major aviation groups is now close to the bottleneck of scale.

According to the three annual report of 2019, the fleet of the three largest fleet has reached nearly 1000. Among them, Air China already has 676 aircraft, East China operates 719 planes, and the fleet of China Southern Airlines reaches 849. Wang Zhiyong believes that after reaching a thousand scale scale, there has been a fundamental change in the way of production organization, and some services need to be outsourced. At this time, we can refer to the CPA mode widely used in Europe and the United States (the power purchase agreement), that is, a large-scale commercial network and full service airline buying a business mode of transportation to small airlines or branch airlines.

CPA mode has already had very mature operation experience in Europe and America, and has proved to be successful. Wang Zhiyong introduced that at present, the fleet size of the three largest companies in the United States has exceeded 1000. The number of American Airlines is the largest, reaching 1550, and Delta Airlines and the United Airlines are more than 1300. However, there are no more than 1000 aircraft owned by the three airlines, and 1/3 aircraft are rented by other companies through CPA.

Wang Zhiyong believes that with the demand for fine management of civil aviation, it is necessary for China to set up a professional transport sales company, specializing in the operation of regional aircraft and home-made aircraft, providing power supplement for the three major airlines. After all, airlines have more types of aircraft, the higher the cost and the less economic benefits, it is better to purchase services from a transport company selling a certain type of camps to supplement their capillary market demand.

However, Wang Zhiyong did not say exactly how long it would take. The domestic shipping division could accept the CPA mode. Li Guijin thought it would take at least five or six years, or even longer. At the same time, he thought that the three airlines should not join the joint venture to sell the transport companies, instead, they should be handed over to the market. "We need to know that the profit margin of American branch Airlines is even higher than that of trunk airlines." Li Guijin believes that once branch airlines have stable and reliable profits, capital will be willing to enter the market, then the development of branch aviation can be clear.

 

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