CHINA: Ever Growing Tourism Makes China World's Fastest Growing Aviation Market

The fortunes of China's largest airlines have risen with the ascent of the Chinese travelers, whose demand for overseas trips have helped make it the world's fastest-growing aviation market.

However, the airlines took many U.S. dollar-denominated loans to buy planes as part of an ambitious fleet expansion, exposing them to the depreciation of the yuan which lost 6.6% of its value against the dollar last year.

Oil prices, which plunged in recent years, have also started to firm, causing jet fuel costs to begin to rise.

China's flag carrier on April 27 posted profit attributable to shareholders of RMB 1.47 billion (USD 213 million) for January to March, down from RMB 2.4 billion during the same period last year.

Its domestic rival China Eastern Airlines said net profit attributable to shareholders was RMB 2.82 billion for the quarter, up from RMB 2.6 billion a year earlier.

China's top economic planner has approved China Southern Airlines' 14.8-billion-yuan ($2.15 billion) plan for a base at a new Beijing airport currently under construction, a day after it approved a similar scheme by China Eastern Airlines.

The National Development and Reform Commission (NDRC) said in a statement on Friday that China Southern will fund 30% of the construction cost, while the remaining RMB 10.3 billion will be financed using domestic bank loans.

China Southern Airlines plans to build a 14.8-billion-yuan (USD 2.15 billion) base at a new Beijing airport, while China Eastern Airlines has a similar plan at 13.2 billion yuan.

China Eastern's 13.2-billion-yuan plan for a similar base at the new airport was given the green light on Thursday.

The airport will be the world's largest in surface area when completed, roughly in line with Hartsfield-Jackson Atlanta International Airport, the world's busiest by number of annual passengers.

China's economic planner approved China Eastern Airlines' 13.2-billion-yuan (1.54 billion pounds) plan for a base at an expansive new airport in Beijing that could eventually be the world's largest, when completed.

The National Development and Reform Commission said in a statement on its website that the base will cover 1.17 million square meters, and 30% of the investment, or RMB 3.96 billion, will be funded by China Eastern.

The remaining RMB 92.4 billion will be financed using domestic bank loans, the statement added.

China plans to complete the first phase by 2019, and will be able to serve 45 million passengers a year with four runways on the first opening. Two more phases would push the capacity to an annual count of 100 million passengers.

That would put the airport as the world's largest in surface area, roughly in line with Hartsfield-Jackson Atlanta International Airport, the world's busiest by number of annual passengers.

Upon completion, rival state carrier, China Southern Airlines, will also relocate to the new airport from the existing Beijing Capital International Airport, the airport project managers told reporters last year.

They said China Eastern and China Southern will handle 40% of the new airport's footfalls.

Beijing Capital International Airport (Beijing PEK) ranked second in the top 20 busiest airports last year, growing 5% to over 94 million passengers in 2016.

Beijing Capital International Airport (Beijing PEK) ranked second in the top 20 busiest airports last year, growing 5% to over 94 million passengers in 2016, according to Airports Council International (ACI), global trade representative of the world’s airports.

Atlanta-Hartsfield-Jackson (ATL) retained the top spot as the world’s busiest airport, boasting over 104 million passengers, 2.6% more than 2015.

Beijing PEK saw subdued growth in previous years as it faced continuing capacity constraints. Conversely, ATL experienced above average growth levels spurred by aircraft fleet expansions in 2015 by Delta Air Lines, its major operator.

Traffic at the world’s 20 busiest air passenger hubs grew 4.7% in 2016. With over 1.4 billion passengers passing through their airports in 2016, this group of 20 represents 18% of global passenger traffic.

Asian airlines continued to make important inroads in the North American market on key international and trans-Pacific segments across airport pairs, particularly between North America and China.

One of the major Chinese airports serving the trans-Pacific routes and other international routes includes Shanghai Pudong (PVG), which grew 9.8% in 2016 to over 66 million passengers. It climbed to ninth place in 2016.

The Chinese hub also serves the catchment area of Shanghai, one of the most populous city markets in the world and a major centre for trade and business. PVG, which represents over 60% of Shanghai’s passenger traffic in 2016, and Hongqiao (SHA), the city’s sister airport, surpassed the 100 million passenger mark in combined passenger traffic.

Shanghai joined the ranks of the world’s busiest city markets in 2016, in the company of London, New York, Tokyo and Atlanta.

The Chinese government has selected China Eastern Airlines to be part of a pilot scheme to reform state-owned enterprises to mixed Public/Private ownership models.

The scheme, which is being rolled out in a slow and controlled manner, is intended to reinvigorate China's bloated public sector by creating globally competitive multinational corporations capable of turning a profit by 2020.

As part of the first pilot reform scheme, the National Development and Reform Commission (NDRC) and the State-owned Assets Supervision and Administration Commission (SASAC) have included a broad spectrum of SOEs. Aside from China Eastern, they include China Southern Power Grid, Harbin Electric Corporation, the China Nuclear Engineering & Construction Corporation, and China Shipbuilding Industry Corporation. More precise details will be released shortly the official Xinhua news agency said last week.

The reform process has been in motion for a few years, with China Eastern selling a 3.55% stake to Delta Air Lines back in 2015 for USD450 million. China Southern is also in the process of securing regulatory approval for the sale of a 2.76% stake to American Airlines.