Airfreight capacity might be constrained at present, with airlines and airports struggling to resume operations, however, China’s huge purchase of aircraft is a strong reminder of the fundamentals of the airfreight market.
On July 1st 2022, Airbus announced that “Air China, China Eastern, China Southern, and Shenzhen Airlines” had signed orders “for a total of 292 A320 Family aircraft”. The statement was made in a low-key press release, in contrast to the usual manner in which such contracts are launched. All of the airlines concerned are State-owned, with the Chinese government making purchases centrally on their behalf.
The size of the deal is very large. It represents an expansion of 15% of the number of Airbus aircraft in service in China. It is unclear when the aircraft will enter service, with Airbus stating that “Once the relevant criteria are met, these orders will enter the backlog”. Presentations by Airbus imply that it has a backlog of possibly 7,000 aircraft of all types, with deliveries running at around 600-700 aircraft a year, a rate Airbus is working to increase.
Most of the aircraft for the new order are likely to be built at the Airbus production plant in Tianjin, in North-Eastern China. China remains one of the most important markets for the A320, with most of the major State-owned airlines having large fleets of this type. The A320 is a medium-range aircraft useful for regional routes rather than intercontinental services.
At present, the Chinese air transport market, both passenger and cargo, is muted due to the continuing anti-COVID policies of the Chinese government. What the decision to purchase 300 new aircraft suggests is that the Chinese State thinks demand will be strong over the next few years and that it intends to ensure that the supply of aircraft capacity will be plentiful.
The strong supply of aircraft capacity – which might be described as the over-supply of capacity – is in keeping with the trends in the belly-freight market seen before 2020. The demand for passenger services in regions such as China, South East Asia and South Asia has been so strong that parallel creation of belly-freight capacity has probably been more than the freight market would otherwise demand. It is tempting to suggest that is the implication of China’s recent purchase.
Source: Transport Intelligence, 7th July 2022
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)