Before We Start This Week…
Today marks the 1,000th Monday Update from Boyd Group International.
We started this weekly invasion of accepted thinking – originally called the Aviation Hot Flash – on our first website, a couple weeks after we moved into our new Evergreen headquarters office building in late 1997.
We’ve covered and explored just about every area of aviation – posing questions and making predictions, and often pointing out factors that run completely contrary to “ambient thinking.”
We’ve openly questioned things like the post-9/11 TSA fiasco. We’ve predicted changes in fleet trends well before the rest of the me-too media noticed.
We had no problem noting the veneer nonsense in many airline “quality” reports, or just plain sloppy and misleading aviation reporting. Usually, we were right on. And, you bet, occasionally, a misfire or two. That’s a part of being on frontlines of the aviation forum.
The Monday Update has been a leading source for independent aviation planning commentary. We thank the thousands of aviation professionals who have joined us over the years.
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The China Aviation Opportunity – It’s On Hold, For Now
The grounding of the 737 Max may be less of a burden on Chinese air transportation that first thought.
While the market there is still growing, it’s now clear that it will be at rates a lot lower than anticipated just a few months ago.
There are growing indications that the Chinese airline industry is in for a major correction. The rapid expansion of international routes in a lot of cases makes no sense. In some cases it appears to be just desperate attempts to utilize airplanes. Budapest – Chengdu is not a stellar local O&D market.
Near Term Corrections Are En Route. The latest Boyd Group International Airports:China™ forecast now indicates a rapidly-slowing growth in China air traffic.
We are projecting enplanement growth to drop to under 6% in 2020-2021. That’s well under the near-traditional 10%+ in the last decade, and below the 8% that was foreseen less than 18 months ago.
Plus, leisure traffic between China and the USA could enter a near-freefall in the coming year. That’s a neck-snapping 180 from what the data indicated just a year ago.
This means that prior forecasts of aviation expansion and investment opportunities in China are now on hold. China-U.S. business traffic will likely stand stable, but projections of huge new tsunamis of leisure visitors are gone.
Reading The Tea Leaves Wrong. The political cognoscenti – particularly those in some sectors of the American financial world who wouldn’t know China from a set of Melmac – have conveniently blamed U.S. tariffs on contributing to the slowing of the economy in the Middle Kingdom, and the decline in China-USA traffic.
Nope.
It’s a nasty cocktail of bank failures, the collapse of investment schemes, leaky real estate bubbles, the rapid decline in auto sales – and other financial hiccups – combining to make what was so recently seen as opportunities for U.S. business turn into mostly vapor.
The rancor over Hong Kong has also changed the level of welcome that U.S. visitors experience in China, and that’s not encouraging folks to visit.
Add to that the inept attempts by the Chinese Communist Party to monkey with the capitalist factors that have built China in the last 40 years. All this progress being transformed into “socialism with Chinese characteristics,” and we have an economy that is now dragging its oars.
What that means is the high levels of investments from China have vanished along with the capital that made them possible. For now.
Confusing Muqian With Long Term. And here is where the danger sits – assuming that these current dynamics are long-term trends.
Expect this: in the next six months, these factors will become obvious, and the trendy stories will appear about China’s troubled economy. They will typically conclude an end to the era of China being as major an economic market partner as once forecasted.
They will prance out with DOT data (of which they don’t have a clue) “proving” that air traffic from China has descended into the ceramic fixture. That’s just muqian – what’s obvious right now, not the future.
Cutting them a bit of slack, the emerging government actions in China would indeed point to a major constriction in economic growth potential and trade with the U.S.
But China will still be the #2 global economy, regardless. Remember that the bureaucrats at the top of the C.C.P. in Beijing didn’t just fall off a turnip truck. They’ve been to college. Beneath the trite revolutionary slogans they’re now digging up from the Mao era, they understand raw economic realities.
Cutting through the political doggerel, they know that China needs the U.S. market a lot more than the other way around.
Those phones and electronic devices, ski parkas, hand tools, toaster ovens, auto parts, raw steel and millions of other items that we now get from China can easily come from factories in other parts of the world. Even New Jersey. These folks in Beijing know that only too well.
Conclusions: In 2020-2021, there will be a continued decline in China-U.S. air traffic.
But this will reverse by 2022, with visitation again exceeding 4 million. The sector mix will be different – less leisure spend, for example – but the raw numbers of passengers will again be going up.
Point: China-U.S. traffic growth is just on hiatus.
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The Leader In China-U.S. Aviation Data & Insight.
If you’re involved in or interested in China aviation issues, give us a call.
Our Airports:China™ data base is the only independent forecast source of traffic and trends in the Middle Kingdom. We have the expertise to provide a wide range of forecasts, research and trend papers on China air traffic and aviation.
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ALL OF US AT BOYD GROUP INTERNATIONAL WISH YOU A GREAT WEEK AHEAD!