On 10 December 2018, the Civil Aviation Administration of China (CAAC) published an over-arching action plan aimed at transforming China into an aviation powerhouse by 2050.
While the initial focus is to address shortfalls in areas such as infrastructure and airspace capacity, from 2020 the ambition is for China to become a global leader in air transport. In order to build internationally competitive airlines, the CAAC says that it will encourage re-organisation of carriers, strategic co-operation, and mergers and acquisitions. It will also support the development of low-cost carriers, as well as regional and cargo airlines.
Of particular note, China is almost aiming to double the number of airports, from 234 airports at present to a target of 450 airports by 2035. As part of that, attention will be focused on raising the competitiveness of Beijing, Guangzhou and Shanghai as international hubs.
As far as Beijing is concerned, the new Beijing Daxing International Airport (around 50km south of the city centre) is scheduled to open on 30 September this year, initially operating four runways, and eventually up to seven runways. The airport will be able to serve 72 million passengers per year by 2025, and ultimately up to 100 million passengers per year. Relocation of carriers to Daxing will occur gradually from 2019 to 2021, with China Southern Airlines and China Eastern Airlines due to become anchor carriers at Daxing. Air China and Hainan Airlines, amongst others, are due to remain at the existing Beijing Capital International Airport. As far as foreign carriers are concerned (including those from Hong Kong and Macau), the CAAC has said that they can choose whether to operate from one or both Beijing airports.
Although the CAAC’s action plan has to be read against the backdrop of a slowing Chinese economy, China’s intent and ambition is clear. The fact that civil aviation has been designated as a "strategic industry playing a primary and leading role" in China’s economic development means that it would be unwise to bet against China ultimately reaching its stated objectives.
What is not in any doubt is that China will soon displace the US as the world’s largest aviation market (forecast to occur around 2022, depending on economic growth). The International Air Transport Association (IATA) predicts that China will serve 1.5 billion passengers per year by 2036, which is consistent with Boeing’s recent forecast that China will need 7,690 new aircraft over the next 20 years. It is therefore no surprise that in our experience, aircraft finance and leasing activity in the region remains high and, subject perhaps to one or two economic bumps in the road, we expect that it will likely remain so.