Soaring passenger capacity expected in H2, but obstacles lay ahead
The air passenger traffic of major Chinese airlines achieved a robust growth amid the strong demand for travel in the first half of 2017.
Data recently published by the country's four major airlines - Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines - showed that their air passenger traffic grew 5 percent, 9.2 percent, 10.8 percent and 53.3 percent year-on-year, respectively.
Budget Chinese airlines Spring Airlines and Juneyao Air also saw their passenger traffic increase 26.8 percent and 26.7 percent, respectively, according to the companies.
"China's stable economy and the steady exchange rate of the yuan mainly contributed to the growth of passenger capacity of the major airlines," Li Xiaojin, a professor at the Tianjin-based Civil Aviation University of China, told the Global Times.
Robust domestic market
Among the six airlines which have released data on their passenger traffic, five saw a faster growth rate for their domestic routes compared with their international ones.
For instance, Air China's domestic passenger traffic increased 6.3 percent in the first half of 2017 year-on-year, while its international passenger traffic grew at a lower 1.5 percent.
Given that security concerns in Europe and the US as well as anxieties over a possible depreciation of the yuan are high, "more Chinese nationals choose their tourism destinations in domestic cities," Li said.
China will overtake the US as the world's largest passenger market by 2024 and will control a market of 1.3 billion passengers by 2035, the International Air Transport Association predicted in October 2016.
"Major Chinese airlines will keep a steady passenger traffic growth in the next few months of 2017 as the travel demand will grow steadily in the peak season due to National Day [October 1] and the Christmas holidays," Wang Jiangmin, an expert with the Hefei-based aviation industry portal Civil Aviation Resource Net of China, told the Global Times on Wednesday.
Both Li and Wang believe that the overall aviation market trends in demand and supply remain positive.
China is committed to ensuring there is sufficient airport capacity in order to satisfy the forecasted traffic growth. Wang used the new airport being built in Beijing's Daxing district as an example of this commitment. The new airport is due to start operating in 2019.
However, major domestic airlines, especially with regard to their international routes, have been confronted with upcoming challenges for the second half of 2017, including increased international geopolitical disputes, exchange rate fluctuations and foreign terrorist attacks, Li said.
In order to grab more market shares, major domestic airlines are expanding into the overseas market.
For instance, Hainan Airlines continues to expand its Southeast Asian services. It plans to open three new routes from Guangzhou, capital of South China's Guangdong Province to Siem Reap in Cambodia, Hanoi in Vietnam and Phnom Penh in Cambodia next week.
In the view of Li, large airlines are more vulnerable to international obstructions than smaller ones.
Smaller airlines, including Spring Airlines and Juneyao Air, can quickly shift their focus to the domestic market if their international routes underperform, but for larger airlines, this process will take more time and will be more complicated, Li noted.
Both experts think that domestic airlines should focus on improving services and providing better experiences for domestic travelers to maintain a stable passenger traffic growth.
The popularity of China's high-speed railway is also considered as another challenge for domestic airlines.
A high-speed railway ticket from Shanghai to Beijing costs about 553 yuan (), whereas a China Eastern air ticket to and from the same two cities costs at least 200 yuan more.
In addition to this, air passengers will risk long flight delays amid the present raining season, whereas long train delays are less likely for rail passengers, said Li.
As of now, the aforementioned airlines haven't yet released their mid-year earnings. Some of them already witnessed their profits decline year-on-year in the first quarter.
Air China, the country's national flag carrier, saw its net profit decline 39.8 percent to 1.5 billion yuan in the first quarter of 2017 year-on-year. Rising jet fuel costs and a significant decline in investment gains are mainly to blame for the airlines' declines.