What happens when 1bn Chinese fly?

We expect China to be the largest aviation market globally by 2020, surpassing the US. On our estimates, we forecast China to hit

1bn air pax traffic by 2022E, implying 12% p.a. growth, which we think is possible as the propensity to travel by air tends to

accelerate as per capita income levels rise to US$30,000/yr (China’s 2010E GDP/capita is at c.US$4,000). To accommodate such

tremendous growth potential we have analyzed how many aircraft, pilots, airports, and hotels China may need to invest in.Ther e

are 10 key takeaways from our analyses:

1. 1bn passengers in 12 years;

2. China could double its fleet to c.3,500 aircraft by 2022E;

3. Boeing and Airbus to still dominate long-haul, wide-body aircraft;

4. Chinese OEMs to become a longer-term threat, particularly for RJs;

5. Will the infrastructure be ready?;

6. Changing demographics to create new challenges but opportunities for some;

7. Will China’s airlines rise to the challenge of going global?;

8. Further industry collaboration likely;

9. Middle Eastern carriers are gaining market share and quickly; and

10. Low cost carriers (LCC) ramping up and gaining share in Asia.