13 Nov 2019
We take an in-depth look at the future of the aviation market in the Asia-Pacific region, including some of the challenges presented to OEMs and MROs.
China will replace the United States as the world’s largest aviation market (defined as traffic to, from and within the country) within the next five years, according to the latest forecast from the International Air Transport Association (IATA). This prediction is made all the more remarkable by the relative youth of China’s aviation market.
Before the 1980s, all aircraft in China were operated by the Civil Aviation Administration of China (CAAC). In 1988, three airlines were formed out of the CAAC: China Southern, China Eastern, and Air China. Just five years later, the first private airline was formed, Hainan Airlines.
This marked a transitional moment in the market and was followed in 2004 by the formation of Spring Airlines, the first low-cost carrier to be operated out of China. In 2005, at a ceremony to mark the debut flight of Okay Airways, the CAAC declared that it would open China's aviation sector and encourage private and foreign investment in Chinese airlines.
Just over a decade later, there are approximately 40 airlines operating out of China, and IATA has forecast that the country will gain 921 million annual additional passengers over the next 18 years, reaching a total of 1.5 billion by 2036. The US is expected to gain 410 million new passengers, making China the fastest growing market in terms of annual additional passengers by more than half. **
In light of recent growth, it is no surprise that the leading OEMs and third-party MRO’s have significantly expanded their capability inside the region.
Airbus opened its first factory outside of Europe in the Tianjin Free Trade Zone in 2008, and recently opened an A330 completion center in the same area. Boeing unveiled its first overseas completion and delivery center in China last September after it signed an agreement with the Commercial Aircraft Corp of China (COMAC). Going forward, it is expected that Airbus and Boeing will deliver approximately 300 narrow and wide-bodied aircraft to China every year.
COMAC, China’s domestic manufacturer and AJW customer, has secured more than 800 orders from 28 customers in China and abroad for its 168-seat C919, which took-off for the first time in May this year. The ARJ21, which has been operating for more than a year, has seen more than 400 orders to date.
20 years ago, foreseeing that China would be an area of tremendous expansion, we established ourselves in the region with local sales representatives and in 2012 opened an office in Shanghai, with inventory at a further 15 locations across Asia. Our offices in the region are managed by local aviation professionals, who are able to provide bespoke support to customers in their own language and at a time that suits them.
We leverage our worldwide expertise with knowledge of a region and an understanding of the local cultures. This is particularly important in the Asian market which is built on insightful relationships and where truly understanding a customer’s pain points is what sets a business apart from the competition. Today, alongside COMAC, our contracted service customers include Air Incheon, Tiger Air, JC airlines, Qingdao Airlines, West Air and Cambodia Airways.
However, although this rapid growth presents opportunities for third-party providers like us, the Chinese aviation market is not without its challenges. With China’s historic preference for Factory New (FN) Components, it has meant that a number of airlines have been slow to take advantage of the operational savings that Overhauled (OH) components can provide.
Adding to this, most Chinese airlines are strictly governed by the State Assets Commission (SASAC), which owns the majority of infrastructure assets in China including aircraft and spare parts operated by the Chinese state-owned airlines. This makes component exchanges extremely difficult, as the State ideally wishes to retain the original component fitted to the aircraft from new.
Yet, change is on the horizon. Faced with rising operational costs, low-cost carriers and regional airlines are increasingly embracing used components. As the market matures, bringing with it the realities of aging fleets, the need to dispose of retired parts, and the unavoidable costs of scaling up, it is likely that more airlines will follow suit.
The relative youth of China’s aviation industry means that the vast majority of China’s aircraft are still within warranty. As fleets inevitably mature, we can expect the rotable aircraft parts industry to grow.
For decades, airlines have had to make do by forming patchwork agreements with local MRO providers, but thanks to the emergence of MRO aggregators like AJW, combined with advances in technology and data management, airlines are finding new and innovative ways of taking on the challenge.
With strategic bases across Asia-Pacific, a network of trusted supply chain partners, expertise of the region, our localised service is well-placed to meet the demand and is already seeing an improvement in TATs and customer satisfaction.
As an independent company, we have the flexibility and freedom to be able to evolve and diversify our offering in line with the changing needs of customers in China and worldwide and have developed an unrivaled understanding of the industries supply chain that is regarded as second to none.
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