China of Importance to Australian Aviation

If Australia is smart, real smart, it might well capture many of the important market opportunities opening up in the rapidly expanding China of the nineteen nineties. AWA, Gippsland Aeronautics and most recently the CAA are making So what is the market potential for Australian carriers to inroads into the China market while dozens of major? Statistics abound and tend to tell the story for companies involved for years with Hong Kong are moving selves. All you need is for your eyes to be open and your brain to win contracts worth hundreds of millions of dollars a year. in gear. For instance, within five hours flying time of southern Indeed the figures speak for themselves. In 1992, trade with China lies half the world’s total population. All of China is just China was $2. 9bn, this year it is expected to exceed $3. 5bn one relatively easy sector from Australia. China today has a while 1992 exports were up by 29% on the previous year and population of 1. 2bn, of which some 60m are considered to be exports for the first half of 1993 were up an astounding 58% by UN Purchasing Power Parity (PPP) standards. This Meanwhile, nearly 20,000 Australians visited China direct is expected to grow to at least 200m by 2000 or greater than the (not via HK) in 1992, up 35% on the previous year despite the entire SE Asian market today. China today (using PPP) has a fact that the Beijing/Sydney air route is served by just one Air GDP equivalent with that of Japan with $2. 9 trillion against China 747SP a week, a pitiful excuse for an air service if ever $5. 8 trillion for the USA. On current growth (which may abate there was one. slightly as the economy overheats and the government takes drastic measures to bring things under control) it is estimated that China will become the leading world economic power by 2010 while even today two thirds of households have a colour TV and 80% boast washing machines. Think about it! That Australian exporters are looking at a potentially vast market far greater than any other is obvious but not very useful if they can’t even enjoy the productivity and conven- ience of direct air services into such an economic dynamo.

In recent Recces (Sept & Oct) we have laboured the fact that a market can’t exist till it is developed. That’s logical and it’s also proven fact backed up by examples of Japan and Taiwan just in case those at the helm of Qantas wish to argue the case. A decade ago Qantas operated just three 747 Combi flights a week to Tokyo offering just 760 seats. In late 1993 Qantas offers 18,000 seats a week on 31 services, 18 of which are to Tokyo, Japan is now Australia’s single biggest market and that didn’t happen without proper air services.

Until late 1991 Australians were, for churlish political reasons, unable to fly direct to Taiwan. That market is now served by three airlines – Australia Asia (really Qantas), Mandarin and Eva-and the fruits of their efforts are rich indeed. Visitor arrivals have soared from just 22,600 in 90/91 to 85,000 in 92/93 making Taiwan our third largest Asian market after Japan and Singapore. Furthermore the Australian Tourist Commission (ATC) is targeting 315,000 visitors a year from Taiwan by 2000. Like China today, visitors prior to late 1991 had to transit Hong Kong to get to Taipei. With direct air services the market has rightly bloomed, just as it will in China once we wake up to the opportunity.

Earlier this year the International Air Services Commission (IASC) granted approval for fledgling startup carrier, Australia Air to serve the China market after Qantas declined to for the rights. Qantas has not served Chinasince 1987 though it still maintains a representative in Beijing to monitor events. You might be justified in considering this person to be either blind or working on the side for QF’s rivals! However, the IASC has wisely demanded that Australia Air shows proof that it has at least $55m in capitalisation before being granted final route approval. At this was something that the airline had not achieved though like all startups it continues to naively believe that it can launch services on a fraction of this amount, obviously having learnt nothing from the demise of Compass I and II. If anything these proved that to be a long term player you must have vast resources which for the operation Australia Air is planning even $55m might well be considered marginal.

Another problem is that the Australia/China bilateral was written decades ago in the greyest of terms and lists Beijing as the sole port of entry to China and does not take account of the Aviation wise, there are now 36 air carriers in China operating around 400 jets. Air traffic has doubled over the past five years and is currently growing by more than a third each year with no end in sight. The growth rate last year in fact exceeded the total 1992/93 uplift of Australia! The government has wisely begun to restrict the number of startups following a spate of crashes in the past two years whilst training has been accelerated to cope with demand, something that Australia will gain enormously from as Chinese pilot training academies are established locally.

Within China there are nearly 500 domestic air routes while another 44 are classed as international. Many of the three dozen Chinese carriers (only Air China is international) are large by any standard. China Southern, for instance, based in the booming province of Guangzhou last year carried more passengers with a larger fleet than Cathay Pacific and has something that CX, QF or SQ definitely don’t have, and that’s year over year growth of a quarter to a third of existing capacity! So, in the final months of 1993 Australia drags itself along with one mediocre service a week. Qantas has existing rights to serve Beijing from Sydney but couldn’t even be bothered putting up a counter proposal against Australia Air. Apparently there are now moves at QF to at least recognise that this market might, just might, have some long term potential.

If Australia Air fails to get airborne then Ansett will certainly be waiting in the wings, QF will then of course begin to get active if only to stymie its new foe. Wouldn’t it be wonderful if they did it for the passengers rather than themselves? In the meantime Australian business must labour with the stupidity of reaching a quarter of the world’s population via either Hong Kong or Tokyo.