Boeing, Airbus Bank On China For Growth Amid Slowdown In Southeast Asia

As the Singapore Airshow 2016 kicks off Tuesday, plane manufacturers Boeing and Airbus are turning to China from Southeast Asia and India for short-term growth. Even as the world’s second-largest economy is showing signs of slowing down, its aviation sector is still flying high.

According to Chicago-based Boeing, China Southern Airlines Co., Air China Ltd. and other Chinese carriers will require more than 6,300 new aircraft — worth $950 billion and about 17 percent of the global total — in the next two decades, Bloomberg reported. Chinese airlines and leasing companies ordered about 780 planes, valued at about $102 billion, during 2015.

Even as the Chinese economy is slowing down, the government is encouraging consumer spending. According to data from the Ministry of Transport, Chinese passengers made a record number of trips last week, during the traditional week-long Spring Festival holiday, Xinhua reported. Passengers across the country made a total of 400 million trips, of which about 8.5 million were by air. The country's civil aviation administration said passengers made 440 million trips by air last year and predicted the figure could rise to 485 million this year.

The Chinese government is also promoting air travel, with 66 airports reportedly being built as part of the country’s current five-year plan, taking the number of airports in the country to 272 by 2020. The investment allocation for civil aviation in China during 2016 stands at about $12 billion. In January, the Civil Aviation Administration of China said Beijing's second international airport — the largest construction project in the country's civil aviation history — would become operational by December 2019.

“China’s aviation outlook is not just bright, but arguably the strongest it has been in its history,” Will Horton, a Hong Kong-based analyst at CAPA Centre for Aviation, told Bloomberg. “Chinese airlines are waking up to their potential.”

Speaking ahead of the airshow, to be held near Singapore’s Changi Airport, Tony Tyler, head of the International Air Transport Association, told journalists that profitability of many Southeast Asian airlines was weak. Budget carriers in the region have reportedly ordered hundreds of aircraft from Boeing and Airbus in recent years, making it an important market for the plane makers.

“The budget carriers have captured a lot of market share but one has to ask how profitable are they and are the growth plans that some of them have realistic,” Tyler reportedly said, adding: “It’s easy to place these orders when times are looking good.”

He said some airlines may decide to push back deliveries of aircraft. “I’m sure that the planning departments of all these airlines are now studying their orders in the context of what the market is telling them,” Tyler said.

Boeing estimates that China will displace the U.S. as the world’s biggest aircraft and travel market in two decades, Bloomberg reported.