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The rise of Chinese aviation, and the rise to come

Get ready to update your trivia files. Beijing’s Capital Airport is likely to become the world’s busiest airport this year. It’ll knock Atlanta Hartsfield off a perch it’s occupied for nearly twenty years and become the first non-American airport at the top since, well, ever. It’s a sign of the massive rise of aviation in China. And there is much more to come, provided regulation makes way for innovation.

The Chinese aviation market is dominated by publicly owned airlines. The single state run carrier was broken into six in 1988 and have since consolidated into the big three: Air China, China Eastern and China Southern. Then there are a a plethora of other carriers owned by municipal governments seeking prestige. There are some successful private carriers too. Of these Hainan Airlines is notable because its service levels match the best in the world.

What’s missing is low cost carriers (LCCs). You know, the kind that offer low fares, charge for you for drinks, and have innovative fare structures that everyone complains they;ve been tricked by on facebook. China’s got one, Spring Airlines (its particular trickery is to give passengers a combined 15kg luggage allowance for checked and carry on combined*) but it should have many more. LCC flights make up only 5% of the market in China, when it’s more like 25% worldwide. For my money, that’s why air travel in China is actually lower than would be predicted by its wealth.

Regulation makes flight inaccessible

The lack of LCCs is primarily due to regulation. The number of licensed airlines is set and their fleet numbers are capped. Applications to fly new routes are cumbersome and the government had a big hand in setting airfares. Flying here is expensive as a result. When booked up trains or sheer distance has forced us into the skies we’ve paid about $90NZD per hour of flight.

There have been some moves towards deregulation recently. In March this year the regulator announced it was relaxing restrictions on budget airline fleets. If this trend continues hopefully we’ll see competition and innovation, plummeting fares, and the kind of democratisation of air travel that LCCs have created in places like Malaysia, India and Mexico.

Airlines don’t talk about themselves as regulated industry. It doesn’t sound sexy. They’d rather we think of them as brands and businesses. But actually regulation plays a massive role in air travel’s development. The absence of LCCs in modern China is a good example. There are others closer to home. Until the 1980s Australia’s two major carriers had to fly dual schedules by law. That meant if Ansett had an afternoon flight from Sydney to Darwin, Australian Airlines had to have one too.If flight becomes as much more accessible in China in the next thirty years as it has in Australia and New Zealand in the last thirty, it won’t just be Beijing’s airport at the top of the rankings. China as a whole will become the busiest air travel market in the world.

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