China's passenger growth increased at a rate of 7.5% year-on-year in Oct-2011, according to CAAC data, marking the fifth consecutive month of single-digit growth and a slowdown from Sep-2011's 9.5% increase. Aug-2011’s growth rate of just 4.5% was the slowest pace of expansion since Sep-2008 and there have been only two months of double-digit passenger growth this year. Passenger traffic in China has grown by an average 15.3% p/a over the past decade, or around three times the world average for the same period. So 2011 is definitely a below par performance.
The freight market however has been much worse. Traffic fell 6.3% in Oct-2011 to 469,400 tonnes.
Cargo volumes have declined on a year-on-year basis in six of the ten reported months of 2011. Domestic cargo volumes remained virtually unchanged (-0.2% year-on-year) from Oct-2010 levels, but double-digit freight reductions were seen on regional (Hong Kong/Macau/Taiwan) and international routes, of 15.6% and 17.3%, respectively, in Oct-2011.
CAAC cargo volume (tonnes) and year-on-year change: Oct-2010 to Oct-2011
While noting that passenger traffic has seen “steady growth” in the month, CAAC data revealed international routes are performing better than domestic and regional sectors. Over the past two years, this has generally been the case in all but a few months.
CAAC domestic passenger numbers growth vs international passenger numbers growth: Jan-2010 to Oct-2011
International (excl. Hong Kong/Macau/Taiwan) passenger numbers (10,000s) and year-on-year change (%): Aug-2010 to Oct-2010
Regional (Hong Kong/Macau/Taiwan) passenger numbers (10,000s) and year-on-year change (%): Aug-2010 to Oct-2010
Domestic passenger numbers increased 7.3% year-on-year to 24.5 million in Oct-2011, with growth of 7.4% to 652,000 passengers on regional routes and growth of 10.5% to 1.9 million passengers on international sectors.
CAAC domestic passenger numbers (10,000s) and year-on-year change (%): Aug-2010 to Oct-2010
The China market, however, remains strongly domestic focused. Domestic capacity comprises 79% of total seat share.
China international vs domestic capacity share (seats): 05-Dec-2011 to 11-Dec-2011
CAAC noted that load factors continued to be at “a high level”. Load factors averaged 82.6%, a 0.5% month-on-month increase. Total load factors weakened 0.6 ppts on a month-on-month basis to 72.3%, driven down by weaker and weakening freight load factors.
CAAC load factor development – passenger load factors and total load factors (%): Oct-2010 to Oct-2011
IATA, upon the release of its Oct-2011 traffic, stated Chinese domestic load factors stood at 83.1%. This marked an 8 ppt increase in load factor levels achieved only three years ago, and “has played an important role in improving the profitability of Chinese airlines”, IATA said.
China and other key market domestic load factors (%) by country: Sep-2011 vs Oct-2011
China is the second largest domestic market after the US. As noted by IATA in its traffic statistics for Oct-2011, domestic traffic (RPKs) in China increased at a rate of 8.4% in Oct-2011, down from 9.7% in Sep-2011. This traffic increase was "slightly below the capacity expansion of 8.8%," IATA said.
China and other key market traffic (RPKs) growth by country: Sep-2011 vs Oct-2011
According to OAG FACTS data for Nov-2011, domestic capacity in mainland China will increase by 10% year-on-year in Nov-2011. China’s international capacity will see an even sharper increase of 12%, equating to 845,307 additional international seats. Monthly frequencies are up 9.5% year-on-year in the domestic market (including Hong Kong and Macau markets) with a 12.2% increase in international frequency. Domestic frequencies have increased by 196% over the past decade, with an 116% increase in international frequencies between Nov-2002 and Nov-2011.
China domestic (including Hong Kong and Macau) frequency: Nov-2002 to Nov-2011
China international (including Hong Kong and Macau) frequency: Nov-2002 to Nov-2011
Amid deteriorating global economic conditions, the CAAC in Oct-2011 cut its official air traffic forecast for 2011. China's passenger growth forecast was cut from 13% to 8% this year to 288 million passengers – 13.4 million fewer passengers than previously anticipated – but up from 267 million last year. The air cargo growth forecast was dramatically slashed from growth of 11.5% to flat in 2011, a repeat of 2008 when world economic growth faltered. China's airlines are now expected to handle 5.6 million tonnes of airfreight, against 6.4 million tonnes forecast previously.
But China's long-term growth forecasts remain unchanged, with 450 million passengers still expected by 2015, despite the impact of high-speed rail.
CAAC passenger numbers and growth forecast
2010 was clearly a banner year of recovery after the downturn in 2008/09, but 2011's volumes have been well below expectation, particularly since the middle of the year.
CAAC freight traffic (million tonnes) and growth forecast
As noted by OAG FACTS this month, China continues to exhibit stronger growth than the global average, as has been the case for some time. China’s largest carriers – China Southern, China Eastern, Air China, Xiamen Airlines, Shenzhen Airlines and Hainan Airlines – have all shown growth in departures domestically and internationally year-on-year in Nov-2011 - and this trend is likely to continue well into 2012. But whether load factors, yields - and therefore profitability - hold up is a different question.
CAAC traffic highlights in Oct-2011:
- Passenger numbers: 26.4 million, +7.5% year-on-year;
- Domestic: 24.5 million, +7.3%;
- Hong Kong, Macau and Taiwan: 652,000, +7.4%;
- International: 1.9 million, +10.5%;
- Passenger load factor: 82.6, -0.4 ppt;
- Cargo volume: 469,400 tonnes, -6.3%;
- Domestic: 320,900 tonnes, -0.2%;
- Hong Kong, Macau and Taiwan: 15,200 tonnes, -15.6%;
- International: 148,500 tonnes, -17.3%.
CAAC passenger traffic growth (%): Oct-2010 to Oct-2011
CAAC passenger numbers growth vs cargo volume growth: Jan-2010 to Oct-2011
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