Preparing for China

China’s growing appetite for travel as a result of the accumulation of wealth on the mainland will be one of the biggest game-changers for the aviation industry in the coming years. Just 15 million outbound trips are made from the mainland every year now, that figure will grow to 200 million by 2030.” John Slosar, Chief Executive at Cathay Pacific.

China’s middle class is currently estimated to be anywhere from 300 million to 400 million people. The upper-middle class segment – seen as the main driver of future economic growth – is growing rapidly, with a recent McKinsey report predicting that it will account for circa 54 percent of urban households by 2022, up from just 14 percent in 2012.

The emergence of a rapidly growing upper middle-class with aspirations to travel, record levels of urbanisation, and continued growth in business and trade activity is creating a pressing need for better aviation infrastructure across China and presents major opportunities for international airport operators.

Whilst ‘luxury’ European cities typically top the most desirable destinations list for Chinese travellers, Australia is also a major draw. Its relative proximity to China and a weakening dollar mean that it is becoming increasingly attractive.

This emerging trend is supported by Deloitte’s recent Australian Tourism and Hotel Market Outlook, which shows that international visitor arrivals grew 4.9% over the year to March, largely led by the emerging Asian economies and in particular China, which accounted for more than a third of total growth in visitor arrival. The report also predicts that more than two thirds of growth in the next three years will come from Asia, mostly from China.

The Chinese Five-Year Plan

The Chinese government has recognised this trend and within its twelfth Five-Year Plan has made a commitment to further developing core international hub airports, with trunk routes and secondary regional airports across the country. In total, China’s Civil Aviation Authority is expected to commit around $4.25 trillion within this Five-Year Plan, an increase of 50% compared with the previous one.

However, as we approach the mid-point of the current Five-Year Plan, relatively little of this development has taken place. This means that over the next three years, there needs to be a significant acceleration in terms of developing new airports if the government wishes to deliver on the vision it set out within the manifesto.

The Australian response

As the Chinese Government starts to ramp up its aviation capacity, Australian airport operators also need to act quickly to prepare for the likely increase in Chinese travellers and ensure their airports are attractive propositions for Chinese airlines and travellers alike.

We recommend that operators focus on the following key areas to enable them to capitalise on the significant growth opportunities.

1. Develop a relationship with a second or even third tier city airport

2. Collaborate effectively with airlines

3. Know your customer

4. Address the communications challenge…