China’s evolving fleet

China is now thought to the biggest commercial aviation market. As of 2Q18 China had 3,776 active commercial aircraft compared to the USA with 7,749, making the USA a comfortably larger market by fleet. Asia as a whole had 8,771 active aircraft. The chart shows the relative sizes of the active fleets worldwide as of 2Q18. China is clearly on a tear in aviation growth terms as the next chart illustrates. The trend line shows a near 550% growth in fleet between 2000 and 2Q18. The number in years above the columns is the average fleet age. The percentage in blue sections reflect the proportion of single-aisle aircraft. The fleet has aged slowly over the period. This is because has been a steady buyer of new aircraft. The growth has been bolstered by steady deliveries. What is noteworthy in this chart is that the market seems to have matured with 83% of the fleet in single-aisles since 2015. To underscore how much demand the Chinese airlines are putting on its fleet, we created the following chart showing the percent of the fleet that is parked. China's airlines are reluctant to park aircraft because demand for air travel is growing so fast. Whereas the rest of the world is at about 8% parked fleet, China is at about a quarter of that. Next, we take a look at one of the big drivers. Sure there are a seemingly endless number of people that want to travel by air, and China is a big country. The next chart shows the rapid growth of its airlines. We cannot think of any other market with so much growth in operators. China has already gone through some consolidation, and many of these operators are part of the giant combines. But still, the numbers are amazing. No wonder China has been developing plans for its airline industry to limit the growth. Finally a thought on the Airbus vs Boeing competition in China. The chart shows something not commonly discussed. Many people have commented on how China seeks vendor parity to ensure it gets the best prices. As the chart illustrates, China has moved both OEMs to parity. But what people don't discuss is that this doesn't mean China has the upper hand in pricing. Because of geopolitics, it is China that has to keep the two in parity. Sure China will get sharp prices, but China has to, in the end, ensure parity. Perhaps this why China is so eager to build its domestic aerospace market. A successful, or even a reasonably successful, C919 will help reduce the dependency on Airbus and Boeing. China may not be big enough to support three OEMs. But Airbus has a FAL in Tianjin. COMAC is growing. That means two of the three have a foothold to work from. With the writing on the wall, here comes Boeing. China will keep playing the big OEMs off against each other, hoping to build its fleet because of travel demand, at the best prices. But it is also accomplishing its strategy of building skilled jobs.

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