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China’s aviation industry is growing rapidly, in line with its burgeoning economy. The CAAC is the aviation authority under the Ministry of Transport of the People's Republic of China responsible for civil aviation and the investigation of aviation accidents and incidents. The military controls Chinese airspace (restricted), in addition to flight clearances and authorisations. Non-commercial air travel is subordinate to military traffic and as such, general and private aviation in the country is rare.
Airports in China
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Garuda Indonesia is planning further international expansion in 4Q2016 and 2017, despite a recent lacklustre performance in the international market. Garuda is adding capacity to China in 4Q2016 and aiming to launch services to the US in 2017.
Garuda’s international load factor was only 70% through the first eight months of 2016 as the airline struggled to fill additional seats generated by an 18% increase in ASKs. International yields have also declined as Garuda swung back into the red in 1H2016.
The long haul network has particularly struggled, driving the drop in profitability. However Garuda is keen to continue strategic expansion.
During the past year Air Canada has found itself defending its double-digit capacity growth, stressing that 90% of its capacity in 2015, 2016 and 2017 is being deployed to its international network – an entity the company believes is far from reaching maturity. Recently the airline has outlined plans to introduce a raft of new long haul flights to Europe and Asia operated by Air Canada mainline and its low cost arm – Air Canada rouge.
Air Canada stresses the pillars of its international expansion – Boeing 787 widebodies and the establishment of its low cost subsidiary rouge – enable the company to enter international markets it once considered unviable due to higher costs. During the summer of 2018 rouge will nearly reach its 50 aircraft cap, and Air Canada needs to start determining if there are further opportunities to grow its low cost unit. Those evaluations will partially dictate Air Canada’s overall growth levels beyond 2018.
In the short term Air Canada is not seeing any broad changes in consumer behaviour, reflected in its solid booking curves. Weaker markets in Western Canada, hit by the downturn in the oil sector, are stabilising as capacity cuts have resulted in a rational supply-demand scenario.
This is Part 1 in a two part series on Air Canada. The second instalment will focus on the airline’s costs and balance sheet management.
The Maldives has experienced a drop in visitor numbers from China, its largest source market, prompting MEGA Maldives Airlines to restructure its network and defer expansion. The privately owned leisure airline currently only operates a fleet of three aircraft – the same number of aircraft as three years ago – and has fallen well short of an initial objective to operate 18 aircraft by the end of 2016.
MEGA’s scheduled network is limited to three destinations in China. The airline is finally starting to increase its reliance on other markets – including India, Malaysia and Saudi Arabia – under a diversification strategy which it has had for a few years but has so far struggled to implement.
MEGA needs a more balanced network to resume growth. Its recent troubles, including layoffs, highlight the risk of relying too much on a single market.
The 747 has been in the spotlight since the Aug-2016 passing of lead engineer Joe Sutter. The iconic aircraft's milestones and fade from service come into focus again with the impending retirement of Cathay Pacific's passenger 747 fleet. A Cathay Pacific 747-400 was the final commercial flight to depart Hong Kong's old airport at Kai Tak, while another Cathay 747 was the first commercial flight to land at the new airport at Chek Lap Kok – with that flight also the first to use a Polar Routing, one which has changed the Asia-North America market for all airlines.
After the 01-Oct-2016 return to Hong Kong of Cathay's final passenger 747 flight, CX543 from Tokyo Haneda, Cathay's last three passenger 747s will be decommissioned from normal service. The global fleet of passenger/combi 747-400s will then decrease to 204, according to CAPA's Fleet Database. The 747-400s in regular, non-charter service will number 175. Six airlines – British Airways, United, KLM, Lufthansa, Qantas and Thai Airways – operate 10 or more 747s, accounting for 65% of what is left of the regular in-service fleet. United will retire its 747 fleet by 2018, while British Airways and Qantas (which operates the slightly newer 747-400ER) look likely to be some of the last 747 (non-8i) operators, with service stretching into 2020.
The A380 is once again under media scrutiny, despite there being no major movement on the type. Comments from Air France and Qantas about not taking further A380s have long been assumed, and it has been apparent that Malaysia Airlines does not even have the need for its A380s. Singapore Airlines not renewing the lease on its first A380 is hardly surprising, and offers no definitive conclusion about the A380 or second-hand market; early A380s had different production and are not as efficient as later models. The lack of movement on the A380neo continues to irk the model's largest customer by far, Emirates, and may not make for a productive relationship as Emirates weighs an A350 or 787 order.
For most, the A380 continues to fly. How and where it flies is changing. Flights to and from the Middle East are becoming more common as Gulf airlines, and mostly Emirates, take delivery of A380s. A further shift to the Middle East is inevitable. In Japan there has been a near exodus of A380s; airlines dropping the type as they moved from Narita to Haneda, which cannot accommodate the A380 during the day, and Singapore Airlines down-gauging. Intra-Asia flying is decreasing – notable given the growth of A380s based in the region. Services by the A380 to Australia are growing, perhaps as it becomes an easy market for airlines to redeploy capacity amid European security concerns and trans-Pacific overcapacity.
Aviation has yet to define India’s role in the trans-Pacific growth story. Geography allows connections from North America to India via Europe, the Gulf and – more quietly – Northeast Asia. Northeast Asian airlines have a theoretical advantage linking India with the North American west coast. The challenge they face is fitting a square peg into a round hole.
The presence of Northeast Asian airlines is large in North America but small in India, while Southeast Asian airlines are small in North America but large in India. Cathay Pacific, and to a lesser extent All Nippon Airways, are in the strategic sweet spot, relatively. Growing China-India relations could result in Chinese airlines playing a larger role in this market. The different transit regions available mean that there is competition between partnerships and joint ventures. These pressures could grow as the Indian market continues expanding.