China needs more airplanes in the coming years to meet the 　　demand of its fast-developing aviation market
　　
　　During U.S. President George W. Bush’s Beijing visit last November, China signed a deal with the United States ordering 70 Boeing 737 jets, worth about $4 billion. One month after that, Chinese Premier Wen Jiabao on a visit to France placed the country’s biggest ever order for 150 Airbus A320 airliners, worth $9.7 billion. After the two big orders, Boeing Co. holds 60 percent of the Chinese market and Airbus owns a 30 percent market share.
　　These two deals were just part of the orders that Boeing and Airbus received in 2005. On January 28, Boeing signed a $7.2-billion deal with the Chinese Government and airline company representatives, selling 60 new 7E7 jetliners to the latter. On the same day, China Southern Airlines inked an order with Airbus in Paris to purchase five Airbus A380 superjumbo aircraft, while Air China bought 20 Airbus A330-200 aircraft.
　　Yet at the end of 2004, Yang Yuanyuan, Director of the Civil Aviation Administration of China (CAAC), said during a national meeting that domestic airline companies had already ordered enough aircraft to meet the demand of 2005, so the country would not approve the purchase of any new planes in 2005.
　　However, the fact is that China placed big aircraft orders one after another last year, surprising international observers who wonder what the country will do with so many planes.
　　Tip of the iceberg
　　
　　ALL ABOARD: More and more Chinese now opt to travel by air
　　Meanwhile, others are saying that the recent string of large orders won’t meet the growing need.
　　“These airplanes are still not enough,” said a CAAC official who asked to remain anonymous.
　　The official said there are now 15 airline companies in China’s civil aviation market and about 900 passenger planes, some of which are rented while most need to be retired because they are old.
　　In the coming years, China still needs about 1,000 passenger planes of various types, according to the official. This figure is even larger according to Boeing’s forecast, which is that China needs more than 3,000 airplanes in the next 20 years.
　　From January to November 2005, China’s overall aviation transportation saw 23.7 billion tons per kilometers (tons-km), 126.76 million passengers and 2.75 million tons of cargos, an increase of 11.4 percent, 12.7 percent and 8.8 percent, respectively, compared to the same period of 2004.
　　International Monetary Fund statistics show that when per-capita GDP arrives at $5,000, each person travels by plane on an average of 0.5 times each year. In 2000, the number for China was 0.0531 times, that is to say, the Chinese civil aviation market still has great potential.
　　In 2004, the three main indexes (total transportation turnover, volume of passenger transportation and volume of cargo and post transportation) for the transportation volume of the country’s civil aviation industry ranked third in the world and the figures for 2005 are expected to boost China to second place. The gap between China and the United States, the world’s top aviation nation, is shrinking rapidly. In 2000, China’s aviation turnover was 12.25 billion tons-km, only 9 percent of the United States,’ while the ratio rose to 20 percent in 2004, said Li Yongqi, a CAAC official.
　　There is also intensified competition in the country’s civil aviation market. In 2004, China fully relaxed control over the entrance of private capital into the civil aviation sector. It started to encourage the investment of private and foreign businesses in aviation transportation. As a result, some private carriers were established. Facing fierce competition, airline companies have to continuously offer discounted tickets to attract passengers.
　　But according to CAAC Director Yang, even with discounted air tickets and increasing fuel prices, China’s civil aviation sector still reaped a total profit of 5.82 billion yuan ($720.33 million) from January to November last year, of which airline companies shared 2.61 billion yuan ($323.04 million) and airports accounted for 1.89 billion yuan ($233.92 million).
　　Yang predicted that in 2006, China’s civil aviation turnover will arrive at 29.5 billion tons-km, passenger transportation at 159 million persons and cargo and post transportation at 3.36 million tons, increasing by 13 percent, 15 percent and 10 percent, respectively, compared to the previous year. He also said the country’s civil aviation transportation will develop at an average annual rate of 8.3 percent, which means China still needs more airplanes.
　　The Contemporary Aviation Group forecast that in the coming years, inbound tourism, domestic tourism and outbound tourism for the country will maintain or outpace the growth rates of 15 percent, 10 percent and 20 percent, respectively. It is expected that there will be about 50 million tourists traveling by air this year and 65 million next year, rising by 60 and 30 percent, respectively. The increase of tourist passengers is becoming an important impetus in the rise of passenger transportation volume in the country’s civil aviation market.
　　Digesting the big deals
　　China’s two large deals with Boeing and Airbus at the end of 2005, totaling 220 airplanes, will be distributed to eight airline companies including Air China, China Eastern Airlines, China Southern Airlines, Shanghai Airlines, Xiamen Airlines, Shandong Airlines, Hainan Airlines and Shenzhen Airlines.
　　Those companies have already signed purchasing contracts, and the planes they buy will be delivered from 2006 to 2010. They are buying the planes mainly for the purposes of enlarging their markets, replacing rented planes they are now using and replacing their old planes to enhance safety. Now, newer and bigger planes are more attractive to passengers who have the right to choose airlines and types of airplanes.
　　Inside information shows that domestic airlines are thinking of eliminating about 80 aging airplanes and replacing them with new ones.
　　In November 2005, China United Airlines eliminated 16 TU-154M planes. After that, this type of airplane, considered relatively good in the 1980s, has been removed from its former prominence. All MD-82 planes in domestic airline companies are to have the same destiny.
　　Though not all these eliminated planes have to be retired or have safety problems, they perform poorly and have a relatively high cost of aviation materials. So airline companies are replacing them to improve operations.
　　According to Mei Xinyu, a researcher with the Chinese Ministry of Commerce, China’s huge airplane deal with Boeing shows the country’s good position in trying to ease a trade imbalance with the United States, while its gigantic order of Airbus planes, to many people, also contains the factor of diplomatic balance.
　　“But it’s more a reflection of China’s economic strength,” Mei said, adding that huge foreign exchange reserves and ever-booming economy enable China to make the big purchase.
　　Made-in-China planes?
　　But these two eye-catching deals also make the Chinese feel distressed, and some blame themselves for China for not being able to build their own airplanes.
　　“Without sticking to the strategy of relying on ourselves for innovation, our technology of making big airplanes has not been up to standard, leaving a colossal domestic market to foreign countries,” said an article posted on Xinhuanet, an official website that also hosts online discussion. “China can create the Shenzhou 6 spacecraft; why not a big plane?” wrote the author.
　　Some people are worried that big airplane purchases satisfy market demand, but also snuff out the appetite and environment necessary for China to develop its own planes.
　　Experts predict that the transportation capacity of the planes bought in 2005 will be released in or around 2010. At that time, already fragile supply-demand relations will be broken by the added capacity, resulting in a surplus of supply.
　　Moreover, since low-cost operation has been a trend for the development of civil aviation in an increasingly competitive environment, once there is surplus, the demand for civil aviation equipment will decrease. This is almost equal to smothering the environment for China to develop its own large planes.
　　Xi’an Aircraft Industry Co. is the only domestic aviation enterprise engaged in the research of large airplanes. It is known that they are trying to build a large type of plane and have it in the sky before 2010. To the company’s managers, 2010 is a key year for them to take a share of the large airplane market, and it is also a vital year for China to decide whether it still needs to make big purchases of planes from foreign companies.
　　Airplanes in Nine Major Airlines
　　Air China
　　Has a total of 168 airplanes, including 78 Boeing B737, 18 B747, 13 B757, 14 B767 and 10 B777 planes; 22 Airbus A319, six A320, one A330 and six A340 planes.
　　China Eastern Airlines
　　Has a total of 190 airplanes, including 10 Airbus A340, 13 A300-600R, three A310, 62 A320, 10 A319 and four A321 planes; 54 Boeing B737 and three B767 planes; 12 MD82/90, five CRJ200 and three ERJ145 planes.
　　
　　China Southern Airlines
　　
　　Has a total of 227 airplanes, including 67 Boeing B737, 29 B757, 10 B777, and two B747-400 planes; 23 MD82 and 13 MD90 planes; six Airbus A300-600R, 22 A319, 29 A320, 10 A321 and four A330 planes; five ATR72 and six ERJ145 planes.
　　Hainan Airlines
　　
　　
　　Has about 103 airplanes, including 60 Boeing B737 and five B767 planes; 29 DORNIER328 planes, two DASH8 planes and some planes for official business.
　　
　　Shanghai Airlines
　　
　　Has a total of 41 airplanes, including 17 Boeing B737, 13 B757 and five B767 planes; as well as five CRJ200 planes.
　　
　　Shandong Airlines
　　
　　Has a total of 37 airplanes, including 20 Boeing B737 planes and 10 CRJ200/700 planes, as well as two CL604 and five CESSNA208 planes owned by its subordinate Rainbow Jet Co.
　　Xiamen Airlines
　　Has a total of 34 Boeing airplanes, including 23 B737 and nine B757 planes.
　　Shenzhen Airlines
　　Has a total of 33 airplanes, most of which are Boeing B737 planes plus one Airbus A320 plane.
　　Sichuan Airlines
　　
　　Has a total of 27 airplanes, including 22 Airbus A320 planes and five ERJ145 planes.
　　
　　Other Airplane Deals in Second Half of 2005
　　
　　July
　　China Cargo Airlines confirmed its order of two Boeing 747-400ER freighters;
　　Air China confirmed its order of 20 Airbus A330-200 planes;
　　Chunqiu Airlines confirmed it would rent three Airbus A320 planes from GE Capital Aviation Services (GECAS);
　　United Eagle Airlines confirmed it would rent one Airbus A320, three A319 planes from GECAS.
　　August
　　Air China confirmed its order of 15 Boeing B787-8 planes;
　　China Eastern Airlines confirmed its order of 15 Boeing B787-8 planes;
　　Shanghai Airlines confirmed its order of nine Boeing B787-8 planes;
　　Xiamen Airlines confirmed its order of three Boeing B787-8 planes;
　　Shanghai Airlines confirmed its order of two Boeing B767-300ER planes;
　　China Southern Airlines confirmed its order of 10 Boeing B787-8 planes.
　　September
　　China Southern Airlines confirmed it would order eight Airbus A330-300 and two A330-200 planes;
　　Jade Cargo International confirmed its order of six Boeing B747-400ER (F) freighters;
　　Hainan Airlines confirmed its order of 10 Boeing B787-8 planes.
　　December
　　China Eastern Airlines changed its November 2004 order of 20 Airbus A330-300 into six A330-200 and 14 A330-300;
　　China Eastern Airlines bought four Boeing B737NG planes.
　　(The above data are based on each company’s statistics.)
　　

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