Chinese traffic ambitions given jolt from tough 2008

By Nicholas Ionides

The extent of the downturn that faced China's airlines in 2008 has become clear, with the first single-digit passenger traffic growth figures being reported by the country's aviation regulator for many years. But the Civil Aviation Administration of China (CAAC) is predicting a return to solid double-digit percentage growth rates this year.

CAAC statistics show that 191.9 million passengers were carried by China's airlines in 2008, representing growth of just 3.3% over the 2007 figure. This is well below the forecast of 14% growth for 2008 that was made at the beginning of last year.

Chinese airlines struggled in 2008 as demand fell after natural disasters in parts of the country around the middle of the year. Demand also fell for several months either side of the Olympic Games in Beijing in August, in part because of strict visa restrictions imposed on foreign nationals for security reasons.

Domestic demand has since returned to double-digit growth rates but international demand remains depressed as a result of a weak global economic climate.


Cargo demand is also being badly affected, as western nations are importing less from China and the country's economic growth rates have slowed.

China Southern Airlines, for example, recorded a 21% drop in international revenue passenger kilometres in December, while China Eastern Airlines' fell 17% and Air China's were down 9%.

China Southern's international revenue freight tonne kilometres plunged 58% in December, while China Eastern's dove 42% and Air China's were down 28%.

China's major airlines have all issued profit warnings in recent weeks, cautioning investors that their 2008 results will be poor. They have also cautioned challenging conditions will remain at least through late this year.

But the CAAC remains generally upbeat about passenger demand in 2009. It said recently that it expects the country's airlines to carry some 220 million passengers this year, representing a return to double-digit growth.

It also expects 8% growth in the amount of cargo carried by China's airlines, to 4.37 million tonnes. In 2008 China's airlines carried just over 4 million tonnes of freight, only fractionally higher than 2007. It had initially forecast freight growth of 12% for 2008.

Despite this more upbeat prognosis, the CAAC acknowledges Chinese carriers will face financial difficulties and urged them to step up cost-cutting measures.

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