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China the focus for regional aviation
By Geoff Hiscock
SYDNEY, Australia (CNN) -- China's recent role as a safe haven and economic powerhouse in Asia make it likely 2003 will be the year when the country comes to the fore in regional aviation, according to a new study. Releasing its 2003 Asia Pacific aviation outlook, the Sydney-based Center for Asia Pacific Aviation says its view is based on China's traffic and tourism growth figures in 2002, coupled with the "enormous progress" China has made towards a long-term aviation strategy. China's inbound tourism grew 22 percent in the first 10 months of 2002, while outbound markets such as Macau, Hong Kong, Australia, New Zealand and parts of Southeast Asia all saw rapid growth. The center says that as China liberalizes market access, airlines, airports and Asia's tourism industry are starting to benefit via stronger tourist flows and more air services. It also points to the recent consolidation of Chinese airlines. Three new groups
Last October, China launched three new aviation groups, designed to make its airline industry more competitive against international competition and to give airlines greater decision-making autonomy. The three groups, China National Aviation Holding (with 118 aircraft), China Eastern Air Holding (142 aircraft) and China Southern Air Holding (180 aircraft), are each built around a main carrier -- Air China, China Eastern and China Southern. "The stabilizing of the domestic aviation industry through recent mergers should provide greater confidence for Chinese carriers to conclude alliance relationships, providing further opportunities for foreign airlines," it says. The center also says there could be progress in 2003 on flights between China and Taiwan. Following the symbolic cross-straits passenger services allowed by Beijing and Taiwan for the lunar new year holidays, the center says "there is a real prospect that there will be progressively bolder moves". It says freighter operations could be the first move along this path. In the medium term, China-Taiwan flights would likely have a substantial impact on the existing gateways of Hong Kong and Macau. But the center believes the threat would progressively reduce because of a rapid buildup in demand and the overall surge in traffic once non-stop services are allowed. Impact of possible warOn the impact of a possible war in the Middle East, the center says the uncertainty is delaying aviation investment and strategic decisions. But for some airlines, there is a valuable offsetting effect in imposing "stringent" cost disciplines and in restraining capacity expansion that otherwise would almost certainly be occurring. It identified other external risk factors in 2003 as slow or delayed U.S. economic recovery and a decline in the U.S. dollar; continuing under-performance of the Japanese economy; and a slowdown in Chinese engagement in the region. But it said there was a low likelihood of the last factor. The center says that 2003 is the year when the overwhelming logic of low cost airlines will start to change the way aviation works in the Asia Pacific region. It cites the success of Virgin Blue in Australia and Freedom Air in New Zealand as examples of how the model might work. Potential marketsIt says there are many potential short-haul markets in the region which are "ripe for development", without undermining national goals or flag carriers. Typically, these airlines will use a single aircraft type, offer a no-frills service and focus on leisure travellers prepared to spend up to four hours on point-to-point intra-regional travel. "There will be independent new entrants, but the recent initiative of Thai Airways -- prompted by its main shareholder, the Thai government -- to establish a subsidiary is an important precedent," it says. Qantas has taken a different tack, establishing its new one-class Australian Airlines for long-haul, low-yielding routes between Australian and cities in North Asia and Southeast Asia. The center says the role of Asian hub airports is changing, as airlines review their strategies. It says under-used regional airports will see the benefit from this before the end of 2003, with a likely surge in point-to-point services. "Tourism authorities and operators will need to be awake to the threats and opportunities which this creates," it says.
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