2015 has been the most profitable year for China’s aviation industry in history, with the sector reaping a 54.8 billion yuan ($8.5 billion) profit despite the slowing mainland economy.
Within the last five years, passenger traffic increased by an average of 10.4 percent per annum, while the number of commercial planes grew from 1,047 to 2,645. Nine new airlines have also been established during this period.
The incredible profits were bolstered by low oil prices which led to lower ticket prices and in turn increased demand. Despite the depreciating yuan, China’s rising middle class are expected to bolster profits for the industry in the coming years.
Several new airlines are expected to take the air in 2016, including Colourful Guizhou Airlines, Hongtu Air and Guilin Air, after the CAAC lifted its seven-year-long suspension of airline license applications in 2013. As the license review process lasts two years, even more new airlines are expected to take to the skies in the next few years.
Many investors are seeking out their spots in the air travel industry. Bocom analyst Geoffrey Cheng said an increasing number of fund managers are turning to the airline sector for its growth potential at a time when the mainland economy is slowing down.
Authorities announced earlier this week that they will soon implement six-day transit visas for foreigners arriving at Shanghai and select cities in neighboring Zhejiang and Jiangsu provinces. The continuing trend towards more lax regulations in the travel sector is also likely to stimulate demand in the aviation sector.
The CAAC encourages airlines to develop international business by negotiating more international traffic rights, while also encouraging the growth of regional airlines and the general aviation industry within China. It aims to transport 485 million people, up 10.7 per cent compared with 2015, and 6.8 million tonnes of cargo, up 8.3 per cent, in 2016.
By Mary DeMay