Riding the cusp of a boom with a China focus

Updated: 2011-12-09 08:10

By Wang Wen (China Daily)

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It is difficult to say whether the World Trade Organization (WTO) membership has triggered an aviation boom in China, but it has certainly helped improve the prospects for foreign airlines, especially after 2001, said Frederic Kahane, general manager of Air France-KLM Group in Greater China .

"Market demand in China has been continuously growing (since 2001), especially in the domestic market, and during the last five years, the growth has been even faster," Kahane said.

The aviation sector has seen a 10 percent growth rate in China every year between 2001 and 2010, according to data from the Civil Aviation Administration of China (CAAC).

Buoyed by the strong growth, carriers are adding more destinations and flights to China.

Air France, which was the first Western carrier in China, started flights in 1966, but had only four destinations and 40 weekly flights before 2001. But in the last 10 years, its Chinese destinations have doubled and weekly flights grown to more than 90 currently.

The expansion has been fuelled by the growing economic exchanges between China and the rest of the world, Kahane said.

More and more Chinese are traveling for business reasons, while foreign companies are also increasing exchanges with China, he said.

"We have more Chinese customers on board our aircraft, not only in the economy class, but also in the business and luxury classes, as trade and economic exchanges have been flourishing," said Kahane.

Chinese companies have become the mainstay of the carrier's business in China since 2009, whereas it used to be foreign companies. The WTO membership has not only increased the people and goods flows to China but also helped more Chinese go abroad easily.

In February 2004, an Approval Destination Status (ADS) agreement was signed between China and Europe, under which 27 European countries became major destinations for Chinese travelers.

"A lot of Chinese travelers have been able to travel to international destinations, including France, because of the ADS visa policy," Kahane said.

The international tourism boom has increased the number of passengers for the carrier, but the executive refused to reveal any revenue numbers.

Some new aviation regulations have also helped foreign carriers get more opportunities in China during the last 10 years.

By the end of 2010, China had signed bilateral air transportation agreements with 112 countries and regions, compared with 90 in 2000, according to the CAAC.

The gradual opening-up of traffic rights allowed foreign carriers to fly to more Chinese cities including some second-tier cities, such as Xiamen and Chengdu. "We need to make sure that we are present in second-tier cities," Kahane said.

Kahane said it makes sense for carriers to be present in smaller cities as many of them have a population much bigger than larger European cities.

However, the carrier needs to evaluate the potential of local residents traveling overseas before it decides to connect destinations.

"The evaluation is important and difficult," Kahane said.

Cooperation with domestic carriers is often the best way to connect small cities, if the international passenger traffic in a city is not enough to support a foreign airline. Foreign Investment in Civil Aviation Provision, released by the CAAC in 2002, increased foreign investment percentage in joint ventures to 49 percent from 35 percent in 1994.

Air France and China Southern Airlines established a joint venture in 2010 and jointly operate some routes between Chinese and European cities. Air France is also planning to set up similar joint ventures with China Eastern Airlines this year.

Such alliances between domestic and foreign airlines became more common after 2007, when Chinese companies started attending major global aviation meets.

China is poised to become the world's second-largest aviation market in the next 20 years, and optimists like Kahane believe that market prospects are bright for foreign carriers.