connecting china - atr€¦ · xinjiang: xinjiang autonomous region this study does not cover...

CONNECTING CHINA

TURBOPROP MARKET FORECAST FOR CHINA

2018-2037

04IN A NUTSHELL

10MARKET TRENDS

22FORECAST BY MAIN AREA

TABLE OF CONTENTS

IN A NUTSHELL

EXECUTIVE SUMMARY

CAPACITY

6 76 76 7

IN A NUTSHELL

ROUTES TO BE CREATED BY TURBOPROPS

AVAILABLE SEAT-KILOMETERS FORECAST

IN A NUTSHELL

TRAFFIC GROWTH

+4.6%GDP

X8REGIONAL TRAFFIC

NEW TURBOPROP ROUTES

2,110NEW ROUTES

13%Existing Network

2016

2018

2020

2022

2024

2032

2026

2034

2028

2030

2037

2036

FORECAST

34%New Regional Aviation Routes

53%New General Aviation Routes

Southwest390

Pan-Northeast650

Pan-Northwest290Xinjiang240

Mid-East540

OF 2037 ACTIVITY WILL COME FROM

NEW ROUTES

87%

EXECUTIVE SUMMARY

CAPACITY

8 98 98 9

IN A NUTSHELL TURBOPROP DEMAND BY REGION

IN A NUTSHELL TURBOPROP DEMAND

TURBOPROP DELIVERIESTURBOPROP FLEET EVOLUTION AND DELIVERIESIn-service passenger fleets

While it is still at an early stage of development, regional connectivity in China is the next big thing.

With over 500 airports to connect, through the opening of new routes, the market is expected to be boosted by both Regional and General Aviation development plans.

IN S

ER

VIC

E

DE

LIV

ER

IES

2017 2037

Growth RegionalAviation 280

Growth General Aviation 800

Stay in service 5

1,105 1,100

25

23070 seat turboprops Regional Aviation


1,100DELIVERIES

80030 seat turboprops

General Aviation

Southwest225

Pan-Northeast345

Pan-Northwest150

Mid-East300

Xinjiang80

Replacement 20

MARKET TRENDS

EXECUTIVE SUMMARY

CAPACITY

131313

ECONOMIC IMPACT OF REGIONAL AVIATION

Either through tourism development or by establishing business, interlinking secondary and tertiary cities allows every community to be connected and benefit from global economic growth – a key component of sustainable development.

+8%Foreign

Direct Investment+5%

Tourists+6%

Regional GDP

+10%FLIGHTS

GENERATES

More Employment

More Social Development

AIRPORTS SERVED EXCLUSIVELY BY REGIONAL AIRCRAFT

Many communities rely on regional aircraft to connect to other countries and regions throughout the world. Through an adapted technology and capacity, turboprops efficiently answer this essential market need.

Turboprops are the benchmark as they provide specifically adapted economics for the average worldwide route length of 300 NM.

Furthermore they ensure accessibility to all airfield profiles and are the lifeline of many communities.

50%Airports relying

exclusively on regional aircraft

36%Airports relying

exclusively on turboprops

3,800+

COMMERCIAL AIRPORTS

WORLDWIDE MARKET TRENDS

CONNECTING LOCAL COMMUNITIES


AIR CONNECTIVITY SUPPORTS LOCAL DEVELOPMENT

12

EXECUTIVE SUMMARY

CAPACITY

14 1514 1514 15

WORLDWIDE MARKET TRENDS TURBOPROPS PLAY A KEY ROLE

IN REDUCING EMISSIONS

POTENTIAL EMISSION SAVINGS BY REPLACING REGIONAL JETS WITH TURBOPROPS

Assuming all short haul flights worldwide operated by regional jets today were replaced by modern turboprops, 11% of overall regional aviation CO2 emissions could be saved.

These 4,100,000 tonnes of CO2 overall regional aviation emissions are equivalent to the annual absorption of 200,000,000 trees.

876,000

1,168,000

1,095,000

949,000

CO2 ANNUAL SAVINGS BY REPLACING JETS ON ROUTES UP TO…

400-500 NM

300-400 NM

200-300 NM

Up to 200 NM

Up to 11% of overall regional aviation emissions saved

tonnes


NEW REGIONAL MARKETS ARE YET TO EMERGE

MATURITY STAGES OF REGIONAL NETWORKS

Although some are very well populated, many countries still have poor regional connectivity, contrasting with mature European and North American markets.

Leveraging turboprop advantages (cost efficiency, access to challenging airfields), China will lead market growth while developing the economies of secondary and tertiary cities.

Regional aviation activity per inhabitantsEarly stage Mature

MATURITY STAGES

Blank: no data

EXECUTIVE SUMMARY

CAPACITY

16 1716 1716 17

CHINESE MARKET TRENDS

TRAFFIC IS HEAVILY CONCENTRATED

CHINESE FLEET EVOLUTION AIRPORT AND TRAFFIC DISTRIBUTION


A FLEET GROWTH FOCUSED ON NARROW-BODY

Regional fleets of aircraft with less than 100 seats are lagging behind China’s tremendous fleet growth and barely reaching a 2% share of the total fleet size against a worldwide average of 25%.

To sustain regional route development, China requires adapted capacities.

Answering demand for air transport between large cities as well as their international connectivity has been prioritised so far.

There are still many opportunities to connect all of the smaller cities through an efficient regional network.

AIRPORTS

90%of traffic is to/from

the 13% largest airports

87%of airports

account only for 10% of traffic

BY TRAFFIC

TOP 32

MID 100

BOTTOM 100

x2

x8

x5

x7

1998

2000

2002

2004

2006

2014

2008

2016

2010

2012

2018

Regional Narrowbody

Wide-Body Total fleet

OVER LAST 20 YEARS

EXECUTIVE SUMMARY

CAPACITY

18 1918 1918 19

CHINESE MARKET TRENDS DIFFERENT FLOWS, DIFFERENT CAPACITIES


AIR CONNECTIVITY COMPLEMENTS HIGH SPEED TRAIN (HST)

HIGH SPEED TRAIN & AIRPORT MAP CAPACITY ALLOCATION VS TRAFFIC

In main cities, high speed train is the solution when large traffic demand generates airport and air space constraint.

Yet many smaller cities can not access high speed train directly. Their air connection to these wider air and train networks is crucial for their development.

Traffic flows between secondary and tertiary cities require adapted capacity sub-80 seats to allow a good level of service frequencies as well as adapted economics to enable affordable fare without subsidies.

HST network

>10Mpax airports

Other commercial airports

Air connectivity is essential to many smaller communities that do not have access to the High Speed Train

Regional Aviation and General Aviation have ideal capacity ranges to fly smaller flows

LARGE CITIES

LARGE REGIONALAIRPORTS

DA

ILY

TR

AF

FIC

FL

OW

SMALL REGIONAL AIRPORTS

GENERAL AVIATION AIRPORTS

HST, large Jets

Mostly narrowbody complemented by turboprops

Mostly turboprops and regional jets

General Aviation turboprops

EXECUTIVE SUMMARY

CAPACITY

20 2120 2120 21

NETWORK SCHEMES GENERAL AVIATION AIRPORT DISTRIBUTION


CONNECTING GREATER CHINA THROUGH COMPLEMENTARY SCHEMES


GENERAL AVIATION AIRPORTS WILL ENHANCE AIR SERVICE PROXIMITY

It’s encouraged to build GA airports around hubs with flows of 10 million passengers or above, per year or above, to undertake non-competing services from hubs. It’s also encouraged to build GA airports to conduct short haul transportation and improve transportation conditions in remote areas or where ground transportation is under developed.

CAAC 13th 5 Year Development Plan

Southwest

Xinjiang

Pan-Northwest

Pan-Northeast

Mid-East

Under planning

Under construction

Constructed

BY REGIONS BY STATUS

Unlimited range within each province

Up to 300 Level 1 General Aviation airports

Large airports

Other regional airports

General aviation airports

Up to 500km inter-province Up to 600km inter-province

Up to 30 seats Up to 100 seats

From/to General Aviation airports and regional airports

Only from/to regional airports

GENERAL AVIATION REGIONAL AVIATION

FORECAST BY MAIN AREA

EXECUTIVE SUMMARY

CAPACITY

24 2524 2524 25


FOCUS ON SOUTHWEST CHINA

225DELIVERIES

3020175

390NEW ROUTES

Famous for rich natural resources and tourist attractions. The challenging terrain makes the HST connection extremely difficult and costly.

The resulting mathematic model is calibrated on 5,000 existing Chinese domestic routes. It is used to estimate activity potential on every airport pair not yet flown.



30 seat turboprops General Aviation


METHODOLOGY

Using gravity modelling, one can correlate each route activity with its characteristics.

ATR's forecast for China considered variables

• Route distance,

• Time to travel by road,

• HST availability,

• Airport activity in size and quality,

• Cities’ local demographics, economic indicators (e.g. income, tourism, …),

• Province’s economic indicators

EXECUTIVE SUMMARY

CAPACITY

26 2726 2726 27


FOCUS ON XINJIANGFORECAST BY MAIN AREA

FOCUS ON PAN-NORTHWEST

80DELIVERIES

10565

240NEW ROUTES

A vast region where travelling by road is time consuming and the cost to build a HST connection is high. Nearly all the air traffic is concentrated on Urumqi, while connectivity between other airports is scarce.




150DELIVERIES

2010120

290NEW ROUTES

The northwestern region is vast, with complex terrain. Regional aviation and GA short-haul transportation requires lower investment than HST and road construction, but always brings quicker turnarounds and development opportunities to local communities.




EXECUTIVE SUMMARY

CAPACITY

28 2928 2928 29


FOCUS ON MID-EAST CHINAFORECAST BY MAIN AREA

FOCUS ON PAN-NORTHEAST CHINA

345DELIVERIES

9520230

650NEW ROUTES

A vast region where road transportation is time consuming and HST connection only connects a handful major cities. Many regional airports require inter-connection. Bohai Bay could be better served by combining complementary air transportation with the HST.

300DELIVERIES

7515210

540NEW ROUTES

This region has a dense HST train network however as development spreads to secondary and tertiary cities Regional Aviation and GA transportation can bring complementary connectivity to these markets, for which the HST network is not designed.







CAPACITY

303030

SAFE HARBOUR STATEMENT

DisclaimerThis presentation includes forward-looking statements. Words such as anticipates, believes, estimates, expects, intends, plans, projects, may, forecast and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements made about strategy, rampup and delivery schedules, introduction of new products and services and market expectations, as well as statements regarding future performance and outlook.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.

These factors include but are not limited to:• Changes in general economic, political or market

conditions, including the cyclical nature of ATR business;• Changes in Chinese regulation of regional aviation and

general aviation;• Significant disruptions in air travel (including as a result of

terrorist attacks);• Currency exchange rate fluctuations, in particular between

the Euro and the U.S. dollar;• The successful execution of internal performance plans,

including cost reduction and productivity efforts;• Product performance risks, as well as programme

development and management risks;• Customer, supplier and subcontractor performance or

contract negotiations, including financing issues;• Competition and consolidation in the aerospace and

defence industry;• Significant collective bargaining, labour disputes;• The outcome of political and legal processes, including

the availability of government financing for certain programmes and the size of defence and space procurement budgets;

• Research and development costs in connection with new products;

• Legal, financial and governmental risks related to international transactions;

• Legal and investigatory proceedings and other economic, political and technological risks and uncertainties.

Any forward-looking statement contained in this presentation/publication speaks as of the date of this presentation/publication release.

ATR undertakes no obligation to publicly revise or update any forward-looking statements in light of new information.

ASSUMPTIONS

Geographic scope

Only domestic routes are considered

Pan-Northwest: Qinghai, Gansu, Ningxia, Shaanxi, Shanxi and western Inner Mongolia (airports west of Hohhot)

Pan-Northeast China: Hebei, Shandong, Heilongjiang, Jilin and Liaoning, north-eastern Inner Mongolia (airports east of Hohhot)

Mid-East China: Henan, Jiangsu, Anhui, Hunan, Jiangxi, Hubei, Zhejiang, Fujian, Guangdong, Hainan

Southwest China: Sichuan, Guizhou, Yunnan, Chongqing and Guangxi

Xinjiang: Xinjiang Autonomous Region

This study does not cover market in Beijing, Shanghai, Tibet Autonomous Region, Hong Kong, Macau and Taïwan

Definitions & assumptions

GDP: Gross Domestic Product

Turboprop in-service fleets are considered in the range of 30-80 seats in standard configuration.

Turboprop aircraft supply is based on in-production and launched programs.

Network range up to 900 NM ~ 1,700 km ~1,000 mi.

Route size considered: up to 450 daily seats each way per carrier.

Depending on distance and traffic flow criteria, each route is allocated to most probable aircraft category, from 30 to 200 seats, jet and turboprop technologies.

General Aviation airports considered of Level 1.

Sources

• ATR Studies and survey

• CAAC

• Flightglobal, OAG, Oxford Economics

• Acknowledgement to Mr. QI Qi and Mr. GAO Yuanyang for their valuable contributions.

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