China's aviation industry response to slowing growth: regulatory disruption

Slowing GDP growth is almost always a negative sign for airlines.

In China's aviation system, the impact is amplified since growth is planned years in advance and adjusting growth is difficult. Accentuating the situation is the fact that, unlike recent years, GDP growth has slipped from double digits to single. But there are new forces at play.

Passenger demand has naturally decreased as GDP growth declined (and for other reasons too), but Chinese carriers have found few levers to pull to adjust to the situation. State-owned carriers have volume targets to meet in order to fulfill their obligations as economy drivers. The resulting passenger growth is generally occurring at the expense of declining load factors and yields.