Photo by Suhyeon Choi on Unsplash, this article is from WeChat public account: Netease Air (ID: wyair163) , author: Henry Lin

On December 6, the 2019 China Civil Aviation Regional Aviation Forum was held in Kunming.

At the beginning of the forum, Hou Qingping, vice president of Yunnan Airport Group, provided a set of data. From 1986 to 2018, the China Civil Aviation mainline fleet expanded from 191 to 3261. At the same time, the regional fleet expanded to 178 frame.

It is not difficult to see from the above data that, while China ’s civil aviation is making great strides, the regional aviation market has been dropped.

Domestic regional aircraft ARJ21

At present, the manufacturer with the largest market share in China’s regional passenger aircraft market is Embraer, which accounts for more than 70% of the turbofan regional passenger aircraft market in China.

According to data from Embraer, China ’s passenger fleet below 130 seats accounts for about 5%, while the world average is 29.4%. For comparison, China ’s current fleet of 150-210-seat passenger aircraft accounts for 73.6%, compared with the world average of 42.7%.

China’s civil aviation seems to have only a trunk market and lacks branch support.

Behind the above data, a widely-circulated opinion states that “Different national conditions, railways have filled the vacancy in China’s regional aviation market.”

But even at the stage when high-speed rail has not yet become popular, China’s regional aviation has not achieved great development, but is gradually shrinking.

In the view of NetEase Aviation, as an important part of public transportation, we do not deny that railway and other transportation have occupied some of the regional aviation market space, but even so, the Chinese regional aviation market should not be so inadequate.

High-speed rail seizes the regional aviation market

The lack of regional aircraft may be an important reason for the stagnation of the regional market in China.

According to the division of the Civil Aviation Administration of China, there are currently about 170 regional airports out of more than 200 civil aviation airports in the Mainland (accounting for about 72%, and it is still rising).

But from the data we gave earlier, it is not difficult to see that as of the end of 2018, there were only 178 regional aircraft in the Mainland, which could not meet the needs of the mainland regional routes. To be more straightforward, no airport can be assigned to a regional plane.

Thus, most of the regional feeder aviation market operations are mainline aircraft.

According to the current national transportation plan, more than 140 airports will still be built in the Mainland by 2035. These airports are basically feeder airports.

Under the reality of the lack of regional aircraft, it is not to say that mainline aircraft cannot be used to fly the regional market, but it is obvious that this will also make Chinese airlines lack some flexibility in the route network.

What are the common airport operations in China’s regional markets?

Common regional airports andMost of the routes between the main airport and the airport are operated by stop flights, and the frequency of flights is relatively low, which makes passengers have fewer choices.

In addition, compared with regional airliners, mainline airplanes have higher flight segment costs, and it is more difficult for airlines to make profits on these routes when passenger flow is comparable.

The biggest advantage of regional aircraft is that the flight segment cost is lower than that of mainline passenger aircraft. Image source: Embraer

But behind the lack of regional aircraft, there are not many regional aircraft that Chinese airlines can choose.

In the United States, the most popular turbofan regional aircraft is Embraer’s E175. However, nearly 15 years after the commercial delivery of this aircraft started, CAAC certification is still being carried out and it has not yet entered the mainland market. At present, the latest regional line models on the market, Embraer E2 series and Airbus A220 series are still in the process of CAAC certification.

Many people also suspect that this is because foreign regional airliners compete directly with domestic ARJ21.

But in an interview with NetEase, Guo Qing, vice president of commercial aircraft at Embraer Greater China, denied this statement: “All aircraft use the same set of standards.” It also said that “2020 From then on, the E2 series will successively obtain airworthiness certificates in China. ”

Embraer still considers the Chinese market as one of the largest growth markets in the future, and its E195-E2 series has also selected China as the first and last stop of this year’s global tour, which is enough to see that Embraer’s influence on China Market attention.

In the interview, Guo Qing also said that with E2’s certification, Embraer’s sales work in the Mainland is also progressing, but because it is a commercial issue, it cannot be disclosed yet. There may be good news in the near future.

So if there are more new regional airlines entering the market and the introduction of more regional airplanes, it will obviously increase the coverage and flexibility of China ’s civil aviation network. At the same time, more regional aircraft are also more in line with the needs of market stratification and refined operations.

Embargos E2 series cockpit, image source: Embraer

But for China’s regional aviation market, the maturity of the market can’t be met by merely setting up new airlines and buying aircraft.

Similarly, the immature market is also the reason why airlines are unwilling to introduce regional aircraft and the market is difficult to develop.

The operating environment of China ’s regional airlines is still imperfect. Although policy, the state has promoted the development of regional aviation through subsidies, low-interest loans, and infrastructure support in recent years. On newly established passenger airlines, it is also “recommended” to start from the branch line, but some fundamental problems have not yet been resolved.

At the China Civil Aviation Branch Aviation Forum in 2019, a speaker bluntly stated, “China’s branch is too dependent on local government subsidies.”

In fact, if you look at it from another perspective, without subsidies, many of the existing mainline aircraft flying branch lines will not be able to develop in the long term. The China branch must explore a feasible sustainable development path.

In the United States, the regional operation mainly adopts the capacity purchasing agreement model. Large airlines do not directly participate in the operation of regional routes, but instead purchase the capacity of regional airlines, thereby extending their route network. This is a typical division of labor cooperation model.

At present, there are similar local governments in China that purchase Huaxia Airlines ’capacity to conduct route operations, but this is essentially a government subsidy in disguise, and the degree of marketization is still insufficient.

Three major US airlines purchase capacity to expand route network

In addition, the current domestic civil aviation resources are still under tension, mainly to meet the needs of the trunk line, which makes it difficult for hubs or regional trunk airports to establish a good connection with regional airports.

In fact, the saturation of the resources of China’s large airports has become very serious, and even the Civil Aviation Administration has carried out “volume control” operations in some airports.

In this regard, in addition to continuing to expand capacity, if the proportion of China ’s regional aviation market can be further increased, the point-to-point transportation between small airports may reduce the pressure on mainline airports.

At the same time, in some suitable western airports, Chinese civil aviation companies can also consider establishing a branch-to-dry transshipment hub through a variety of methods, including “purchasing capacity,” which will help strengthen the airport’s hub status. For example, Chicago O’Hare Airport, which has the highest average daily flight volume in the United States, has more than 54% of regional flights.

And by purchasing capacity, airlines can also increase their market share in relevant airports, which is obviously also beneficial to their development in the region.

However, if we want to build a branch-to-dry transfer hub, domestic civil aviation still needs to further optimize the transit and check-in process.

Compared with high-speed rail, it is difficult for civil aviation to fly anywhere on the mainland. Fortunately, in recent years, I have also observed that the transit services of most hub airports are being optimized, which also makes the concept of transit more acceptable and more conducive to the development of civil aviation, including regional aviation.

Of course, if the regional line also wants to strengthen its competitiveness, it also needs to consider the improvement of the overall level of civil aviation. Of course, this is not just a problem facing the regional line.

For airlines, for example, punctuality is one of the most important factors in competitiveness. Especially when it comes to competition with high-speed rail, China’s civil aviation punctuality is not dominant.

But behind the punctuality rate, in addition to the improvement of airline operation levels, domestic civil aviation management and ground operations also need to be optimized. It is also well known that punctuality is also related to airspace resources, but this is more difficult to resolve because it involves a wider area.

Chinese regional fleet

In general, China’s regional aviation market still has great development potential.

Judging from the relevant policies and statements of the Civil Aviation Administration, supporting the development of regional aviation is also a long-term focus in the future.

As the new airport continues to be used, the further increase in route demand will also help the regional aircraft market that is more suitable for small and medium airports to operate in China,

For Chinese airlines, in the past few decades, due to the large demand gap in the industry, everyone can understand that they are crowding into the trunk market. However, as China ’s civil aviation development enters a new stage, aviation companies must also pay attention to the importance of segmented and differentiated competition in the future.

So, regional aviation has a good chance in China.

However, before development, domestic regional aviation also faces some dilemmas that need to be resolved. However, time and market potential will eventually drive the industry in the right direction.

NetEase believes that maybe ten years later we can see a new Chinese civil aviation market. More and more regional aircraft, more and more hubs and hubs, and more and more point-to-point regional routes will help. China’s civil aviation has reached a new stage.

This article is from WeChat public account: NetEase Airlines (ID: wyair163) , author: Henry Lin