China - Civil Aerospace: Government initiatives to drive growth (Strategy, Performance and Risk Analysis)
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China is one of the fastest growing economies in the world. The sheer size of its population offers a huge market, and makes it an attractive business destination. The government plans to invest in the construction of new airports, as well as the development of existing facilities and aircraft manufacturing and research. Such investments will lead to the introduction of more destinations and routes by operators, resulting in an increased number of passengers, in turn leading to the growth of China’s civil aerospace industry.
In order to boost trade and diplomatic ties with European and Asian countries, the Chinese Government proposed the One Belt One Road (OBOR) initiative in 2013. As part of this initiative, the government signed inter-governmental aviation pacts with countries who are a part of the OBOR initiative and has pledged to start new aviation routes from China to several countries. This initiative will lead to a demand for Chinese aircraft and aircraft parts in OBOR member nations, along with stimulate demand for new aircraft in China as the number of passengers will increase with the introduction of new routes.
Increasing number of tourists to drive the number of air passengers
In China, the number of air passengers increased with a rate of 11.9%, from 436.2 million in 2015 to 488.0 million in 2016, and is forecast to increase at a CAGR of 6.8%, from 516.8 million in 2017 to 673.4 million in 2021. This will lead to renewed growth opportunities for manufacturers, as with the growing number of air passengers, demand for aircraft will also increase.
Increased procurement will lead capital expenditure and deliveries to rise
In China, capital expenditure on aircraft increased with a rate of 0.1%, from US$21.36 billion in 2016 to US$21.37 billion in 2016, while capital expenditure on helicopters increased with a rate of 29.2%, from US$912.3 million in 2015 to US$1,178.4 million in 2016. The number of aircraft deliveries increased with a rate of 0.8%, from 296 in 2015 to 298 in 2016 and is forecast to increase at a CAGR of 10.8%, from 321 in 2017 to 484 in 2021.
Active fleet size to grow
In China, the active fleet size increased with a rate of 15.1%, from 2,467 in 2015 to 2,668 in 2016, and is forecast to increase at a CAGR of 9.3%, from 3,153 in 2017 to 4,493 in 2021. Growth is primarily due to the proliferation of low cost carriers and fleet expansion initiatives by existing airline operators in order to serve more routes.