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China To Surpass US As World's Largest Aviation Market

by Mary Swire,, Hong Kong

28 May 2015

China will surpass the US to become the world's largest aviation market by 2033, according to a new report by aviation intelligence specialist OAG.

The passenger seat capacity of China's carriers – dominated by China Southern, China Eastern and Air China – has increased dramatically from approximately 100 million seats in 1996 to some 600 million in 2014. This has largely been a result of strong domestic demand, which accounts for about 90 percent of China's carrier capacity, according to the report, entitled The Fight for Global Markets – Is Three the Magic Number?.

With their domestic business in solid shape, China's carriers have the resources to expand internationally and have been doing so rapidly, the report said. During a typical week in April 2015, for example, Chinese carriers operated 140 percent more seats on flights to the US than they did in 2010. In contrast, US carriers increased capacity for these routes by only 80 percent in the period. While presently the US carriers are still the capacity leaders for China-US routes, China's carriers will likely close the gap by 2022 if the two sides maintain their current rates of growth.

The report said that US airlines can no longer rely solely on the alliance model to sustain their international growth as other carriers are turning to new forms of cross-border cooperation. It further predicts that the industry will undergo large-scale consolidation, and considers how the 'Rule of Three' – the tendency for industries to become dominated by three large players – could play out in a future, consolidated global aviation market.

"The global aviation outlook is transforming and evolving before our eyes," said Mark Clarkson, OAG's Business Development Director JAPAC. "The evolution is affecting everything – from historical business structures and government regulations to the growth and profitability of the key players in the market. There are currently more airlines than can realistically exist in a truly global market where barriers are eased. Our analysis shows that in time, it's reasonable to expect a major consolidation of airline carriers globally."

In fact the airline industry has already been undergoing consolidation within nations and within regions for some time, OAG said. In Latin American, for example, the airlines LATAM, Avianca and Gol now operate 38 percent of all seat capacity, while in Africa it is South African Airways, Egyptair and Ethiopian that together operate 20 percent of their region's capacity. The greatest degree of consolidation seems to appear in North America, where American, United and Delta account for 54 percent of passenger seat capacity.

OAG's report also singles out Indonesia and Turkey as markets where three globally dominant airlines are likely to emerge in ten years' time. These two nations share with China the advantages of a large domestic market, growing economy and advantageous geographic position.

TAGS: South Africa | business | aviation | China | Ethiopia | Egypt | Indonesia | regulation | Turkey | North America | Africa

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