An industry opinion - the consultant's viewpoint

Speaking at World Routes in Chengdu, our panel of experts took a look at the opportunities and challenges that are being faced in the growth of the Chinese market, what does the growth of this market mean, as well as a brief overview of the impact of the Brexit referendum.

During the Strategy Summit at World Routes, a panel of industry experts shared their thoughts on the growth of aviation within the Chinese region. The panel was moderated by Jeremy Robinson, partner, Watson Farley & Williams LLP, and featured Robert Hill, vice president, Seabury; John Grant, director, JG Aviation Consultant; Edmond Rose, vice president, ICF International; Howard Mann, vice president, Campbell Hill Aviation Group and Yolanta Strikitsa, director, Strikitsa Consulting.

While the Chinese market, and the considerable growth it has enjoyed over the last few years is considered to be full of potential, John Grant went against the grain and said it was actually a problem. Grant said: “China is a problem that we’re not recognising in terms of how to compete against the Chinese carriers and how to develop the market.” Grant continued to comment that the idea that ‘it’s all about outbound traffic’ is essentially true, but it is ultimately going to be a defeatist attitude.

Robert Hill mentioned that this market has been growing for a long time; it was seen developing into Europe with Dutch carrier KLM, and into the US market with United Airlines. With Chinese carriers taking on new fleets, these airlines will be expanding rapidly into the European and American markets. With this continuing expansion, one area that could be worked at according to Hill was a relaxation of visa requirements to enter China. Hill quipped, “every time I apply for a ten year visa, I get a one year visa.” 

Howard Mann sees the need to update on the bilateral agreements that are currently in place between China and the United States. The bilateral agreement is split into three zones, which has seen such a fast increase of frequencies, a growth that cannot be missed. But is it not just the US that are looking at their agreements. Mann disclosed that Canada were negotiating their own agreement with China just last week.

Edmond Rose talked about protectionism in China, yet highlighted that originally China had restrictive agreements with regions. As time has gone on, and growth has continued, China has become much more liberal with their agreements. Rose also said, “not long ago, European carriers had much more activity in China but soon the tables will turn.”

In terms of the growth of the Chinese market being ‘disruptive’, Howard Mann pointed out that the most recent case to consider is that Gulf carriers were too considered ‘disruptive’. He expanded on this by saying, “There were decades of European and US markets taking advantage of the Indian market because they didn’t have a strong carrier.”

It is no secret that a Chinese services have continued to grow, the big budget aircraft orders too have come from Chinese carriers. The orders that are being placed are not necessarily best practice, argued Robert Hill. He said “The order book says the widebody which has less capacity fits the market better than the large A380. If you were to cut it in half to make an A190, you would have the right plane for the market!”

Edmond Rose believes that airlines have never had it so good for long-haul service, stating “there is plenty of choice from manufacturers, but there are not always slots available. New routes can be developed with more efficient aircraft in a far more effective way.”

The UK’s referendum vote to leave the European Union this summer – dubbed ‘Brexit’ – is not as daunting as it was originally made out to be. Grant refers to it as a ‘Diana moment’; the initial impact of it seemed to be massive, “but it was three months ago, and what has changed? We’re at least two years away from anything happening. Airlines are concerned with the next three months, six months, the next nine months. Two years is very far away in their planning.”

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