Will the China civil aviation industry recover as expected?

In 2023, the civil aviation transportation market will see a remarkable recovery.

On January 6, the CAAC claimed that it would increase the proportion of international aviation, cargo aviation, regional aviation, and general aviation in the civil aviation business, accelerate the construction of a new pattern of opening up civil aviation to the outside world and strive for an overall recovery to the pre-epidemic level of 75%.

Just past the 2023 Spring Festival holiday, China's tourism market started in line with expectations, the people's willingness to travel stopped falling and rebounded and the tourism consumption activity showed an upward trend.

So, the civil aviation industry will also emerge from the corresponding development trajectory. We can optimistically expect the market to recover, but whether we can achieve the desired growth target will also depend on achieving innovative development. After all, the environment for industrial development has changed dramatically.

The current outlook for the civil aviation industry is all bullish, especially against the backdrop of a recovering tourism industry and some hot markets, with some experts and institutions predicting that 2024 will far exceed the 2019 level of development. However, achieving this expected growth target will depend on the ability to execute innovative products, as the industry's development environment has changed dramatically.

In terms of factors affecting supply chain disruptions, geopolitical instability, the aftermath of major epidemics, and significant global market volatility are the three primary factors currently directly impacting the global economy. These factors are detrimental to global economic growth and market recovery and can affect demand and service costs in the civil aviation market.

The aftermath of the outbreak response strategies of governments, airlines, airports, etc., will take a long time to resolve, which is the biggest obstacle to market recovery. However, the enormous potential demand gives optimism to the market recovery.

The recent growth in average flight traffic has been accompanied by a significant widening of the fare differential, which means that the civil aviation market will face considerable downward pressure on prices as the market enters a flat development zone. In addition, the recovery of international routes is facing many difficulties, which also affects the access of domestic carriers to flight rights and flight times in key regional markets.

If still adopting the homogeneous competitive measures before the epidemic, such a trend in the domestic airline market will undoubtedly trigger more unsafe development factors and accelerate the market substitution of high-speed rail. (The time has come for civil aviation to learn from HSR as the recovery of railroad traffic is better than that of civil aviation in the same period.) Therefore, the civil aviation market needs to innovate to meet the challenges in the current environment, such as introducing more differentiated services, strengthening digital transformation, and improving the passenger experience.

However, based on the conclusions of the above analysis, China's civil aviation undoubtedly needs to accelerate the pace of innovation and development if it hopes to seize the opportunity of a relatively improving economy.