The Promise of Chinese Air Travel
05 Jun 2006
by Mark AbeTomorrow's New Silk Road
Mark Abe, EDS Air Services Expert
For more than 15 years Mark Abe has serviced the transportation and aerospace & defense industries. With a strong focus on strategic consulting, enterprisewide IT solutions and the transportation industry, Mark is ready to help air service clients meet business objectives.
Sitting on an airplane and peering out the window a few days ago, I couldn't help but contemplate the vast expanse of land and ponder how difficult it must have been to develop global trade in ancient China. Just as our predecessors used the Silk Road to explore, develop trade and commerce, and participate in the global economy, we too now find ourselves using modern air travel in similar ways. China 's role then, as now, served as a critical source of commerce and culture to be exchanged in a growing global marketplace.
From historic beginnings along the ancient Silk Road route to today's intercontinental airways, China has long played a key role in bridging commerce and culture across an ever-shrinking world. As today's manufacturers race to develop and deploy new aircraft, airports renovate to increase capacity and consumers earn more to spend on travel, it is clear that the world has realized the prominent role China plays in the future of commercial aviation.
Several trends point to this role:
- Sustained economic growth – 22 million new Chinese middle-class consumers per year alone – creating a dynamic, demand-driven travel market force hungry for both domestic and international travel
- The Asia Pacific region continues to lead the world in passenger traffic growth rates – the China domestic market alone is expected to grow at rates approaching 14 percent per annum, nearly 3.5 times that of the U.S. market
- Supporting this consumer and economic growth is a tremendous influx of aviation infrastructure – the Civil Aviation Administration of China anticipates a doubling of mainland China 's combined airline fleet to more than 1500 aircraft by 2010 and more than 4000 by 2025
How Trends Impact the Commercial Air Travel Market
From a demand-side perspective, passengers will benefit from increased transparency on selection and price, exploiting the newest technologies that promote customer-direct interaction, whether from the growth and enhancement of Internet connectivity or the continuing proliferation of mobile and wireless services. Airports will also position to serve these passengers, becoming economic commerce centers outright with new channels of retail and commercial services.
This increased, multi-dimensional competition across the entire travel value chain means that service will become a key differentiator in tomorrow's travel world, with passengers seeking quality, reliability and value at ever-higher expectation levels.
Likewise, airlines also will be impacted. Global deregulation promises to continue creating more available destinations at affordable prices, fueling increases in both leisure and business travel. New aircraft will be required to simply match the increase in travelers as well as expanded airport facilities and infrastructure to process passengers. Airlines will need to find new and innovative ways to grow, while still preserving economies of scale and reaching increasing levels of productivity and efficiency in the face of increased domestic and foreign competition.
Technology's Role In Supporting Growth
Technology plays a key role in supporting this growth and must be deployed strategically to position for these market opportunities. Some areas that can be expected to transform include:
- Expanding distribution channels to support increased transparency on selection and price
- Deploying seamless electronic ticketing across airlines and connecting partners to accommodate international travel
- Integrating systems to provide up-to-date, reliable travel information pushed to passengers in real-time
- Improving customer loyalty programs to help differentiate service levels and reward their most valuable clients
Of course, capitalizing on this opportunity does not come without its cost, but the benefits to the traveling public and the natural market forces they conjure are compelling. Airlines that recognize and adapt to these market forces quickly enough will continue to thrive and capitalize on the ever-expanding market. Those who remain rigid, under-invested or unwilling to change, will be surpassed – just as innovation obsolesced the ancient Silk Road – by more agile domestic and foreign competitors blending new relationships, technologies, and business models faster and more efficiently than ever before.
All Eyes On China
The Chinese travel market is at a huge inflection point as the world's eyes turn to China not only for high-profile events such as World Trade Organization (WTO) entry and the Beijing Summer Games in 2008, but also as part of its ongoing maturation, striving to understand where China fits as both consumer and competitor in the global marketplace. The Chinese airline industry has a unique opportunity to exploit this position, learning from mistakes other regions have made and capitalizing on the boundless travel enthusiasm of its people.
There are no forecasts where anyone thinks the China air travel market is going to do anything but grow and at phenomenal, unprecedented rates. By all accounts, the Chinese airline industry is going to be headed for an exciting ride filled with market opportunities, global competition, and the undeniable freedom and economic growth that global travel brings.
With this opportunity comes an evolving Chinese travel market that will come to expect new levels of service, technology and convenience. Just as explorers and traders of yesterday relied on the Silk Road as a conduit to services and commerce, so too will we rely on tomorrow's China air travel market.
Fasten your seat belts...it's going to be an exciting journey.