China

China continues to be one of the fastest growing aviation markets

China's aviation market, one of the world's fastest growing, is going through dramatic changes. Regulatory and policy reforms, low-cost carrier (LCC) and other innovative business models, new technology airplanes, and evolving consumer behaviors are driving airlines to launch additional direct flights and develop more point-to-point networks.

We project that the current growth trend will continue over the next 20 years, with passenger traffic increasing 6.9 percent and air cargo traffic increasing 6.7 percent annually. The majority of the growth, approximately 65 percent, will be within China. About 16 percent of the growth will be international traffic to destinations within the Asia Pacific region. The remaining 19 percent will be long-haul international traffic. To support this growth in demand, China will need 6,020 new airplanes valued at $870 billion.

Domestic markets shifting toward single-aisle airplanes

Over the past 20 years, airlines in North America and other aviation markets have moved from flying widebody airplanes to flying single-aisle airplanes on domestic routes. In 1993, widebody airplanes supplied approximately 20 percent of capacity in North America. Today, that number has dwindled to 5 percent. We have also seen this trend in China, where almost 30 percent of capacity was on widebody airplanes in 1993, compared with 9 percent today.

Single-aisle airplanes, such as the 737-800, provide the efficiency and network flexibility airlines need to be competitive in short-to-medium-haul markets, where quick turnaround and airplane utilization are essential. LCCs and new entrants will stimulate traffic growth in China, as they have around the world. The LCC business model depends heavily on passenger demand for point-to-point service, which avoids connections at hubs and shortens travel time. Point-to-point service will help alleviate congestion at major hubs, such as Beijing, Shanghai, and Guangzhou. New LCCs, coupled with increased growth in established airlines, will drive a need for 4,340 new single-aisle airplanes.

New widebody airplanes opening new markets

New-technology widebody airplanes, such as the 787 and 777, are helping Chinese airlines expand their global networks and compete more effectively with international carriers. In 2013, Chinese airlines opened 10 new long-haul markets. Over the next 20 years, this expansion is expected to continue as traffic to Europe grows 6.1 percent; to North America, 6.3 percent; to Oceania, 6.6 percent; and to Africa, 7.4 percent. China will need 1,480 new widebody airplanes to support this market growth.