The Rhapsody of the Seas has just sailed from Kaohsiung harbor and out towards Hong Kong. That fact is nothing out of the ordinary. Such cruise liners frequently stop at Taiwan’s biggest commercial port. What was unusual was the cruise carried an unprecedented boatload of mainland Chinese tourists

The authorities in Kaohsiung were the first to admit that the tour party, which numbered only 668, was not enormous, nor was its expected impact on the local economy. But it was symbolic of change: the beachhead in a lucrative capital invasion for which the business leaders of Taiwan have been preparing for years.

If, as expected, the KMT under Ma Ying-jiu regains the Taiwan presidency next month, then there is expected to be a speed-up of the opening of economic ties between Taiwan and the mainland. Mainland tourism into Taiwan will be one of the most significant events.

There is huge pent-up demand for mainlanders to visit the ‘Precious Isle’, and they increasingly have big money to spend on eating out, medical care, and general tourist pursuits.

This is desperately important for the airlines of Taiwan. There are four of them and they are all bleeding money.

Taiwan’s overcrowded air passenger market began showing severe signs of financial strain this week when Far Eastern Air Transport, the island’s largest domestic carrier, admitted that a US$4.8m cheque for fuel had bounced.

Although the company obtained a one-month extension for the payment, the incident suggests the island’s aviation industry, which has been losing money for years, is operating in unsustainable conditions.

The airlines are caught by the ban on air transport between Taiwan and the mainland.

If the restrictions were to be lifted the airlines would become profitable and the whole of the economy would receive a boost. That is why the 668 tourists on the Rhapsody of the Seas are so important.
Source: Times Online

According to a report issued by MasterCard Worldwide the Chinese mainland is expected to record 21.6 million outbound tourists in the first half of 2008 with a year-on-year increase of 12.4%.

The report attributed the booming outbound travel market to the increasing number of middle-class Chinese.

It said the number of China’s middle-class families would rise to 100 million in 2016 from 35 million in 2006 in metropolises, such as Beijing, Shanghai and Guangzhou.

‘This, combined with the availability of low cost travel options, means Chinese travelers form a very influential group which is expected to continue to significantly shape trends in the travel business in 2008 and in years to come,’ said Dr. Hedrick Wong, economic advisor to MasterCard Worldwide in Asia Pacific.

China’s Ministry of Tourism in early January stated it recorded 40.95 million outbound tourists last year.

A joint on-line survey by market information provider Nielson and Ctrip.com, a domestic tourism website, said that about 11% of Chinese netizens whose family monthly income tops RMB8,000 ($1,095) want to travel abroad.
Source: China View

Shanghai Airlines plans to increase its flights between the mainland and Thailand to cater to growing passenger and cargo traffic.

The carrier has started a new route, from China’s emerging economic province of Chongqing to Bangkok, and is looking to offer direct service between Shanghai and Bangkok by the end of the year.

It is the first airline to offer a direct Chongqing-Bangkok route. It operates a 184-seat Boeing 737-800 on the route which takes about two and a half hours.

Late last year, Shanghai Airlines doubled its number of flights between Shanghai and Phuket to four a week, using a similar aircraft. The airline started flying Shanghai-Phuket route, which takes five hours, two years ago on a ‘regular charter’ basis.

Shanghai Airlines has since 2006 offered all-freighter services between Bangkok and Shanghai at three flights Boeing 757 cargo planes that have 30 tonnes of capacity.

About one million Chinese tourists visited Thailand last year and the Tourism Authority of Thailand expects the number to reach 1.3 million this year.

Their favorite destinations are Pattaya, Phuket and Koh Samui.

Freight movements between the two countries have also been surging due to growing trade volume. A good portion of shipments from Thailand to China are IT components.
Source: Bangkok Post

Cathay chief executive Tony Tyler said has said that Cathay Pacific Airways will be willing to help fund any bid by Air China for China Eastern Airlines. It will probably do this for two reasons. The first is to make it happen and the second is to avoid dilution of its 17.5% stake in Air China. If the deal goes through it automatically strengthens Cathay’s presence in Shanghai where China Eastern Airlines is based.

Tony Tyler said that Cathay Pacific is discussing closer co-operation with Air China including a Shanghai cargo joint venture.

He said Shanghai is an important market and it’s only going to get more important. He added better management would have little difficulty in turning around unprofitable China Eastern.

This is undoubtedly true. But note that Cathay Pacific has been working with Air China in improving areas such as its cabin service and has not found this an easy task.

Singapore Airlines, the opposition in this case, is currently sitting on a US$3 billion cash pile and almost certainly is going to make another bid for China Eastern Airlines. China Eastern Airlines (some cabin crew in the illustration) is openly hostile about the prospect of an alliance with Air China which makes the situation more than somewhat intersting.

Any move by SIA would re-ignite the currently stalled ‘Battle for Shanghai’ (that is e control of China Eastern Airlines.)

Global equity market weakness could help deflate Chinese airline stock prices which might give a second SIA bid a better chance of success. On the other hand, neither Air China nor Cathay Pacific would have any problems in raising the cash to meet or better such a bid.

As they say in newspapers, this story has legs and will run.
Source: CargoNews Asia and Centre for Asia Pacific Navigation

There is a clear understanding in Beijing that the best way for China to achieve its ambition in civil aviation — namely to build its own fleet of commercial craft — is to work in partnership with Airbus and Boeing, rather than flying solo or partnering with Russian companies.

Beijing has employed this strategy over the last 20 years or so, working with both Airbus and Boeing to produce components and sub-assemblies as a first step on the long road to manufacturing its own indigenous aircraft.

According to Boeing’s forecast, China will demand many more aircraft over the coming 20 years than Boeing had initially expected in 2006. Boeing predicts that between 2007 and 2026, China will purchase 3,400 new aircraft worth US$340 billion, while Rolls-Royce foresees a demand for 3,100 aircraft over the same period.

As a result, domestic demand on the Chinese aviation industry to excel and deliver domestically built aircraft will only increase. In conjunction with the development of commercial carriers and civil helicopters, skills in the Chinese aircraft maintenance, repair and overhaul (MRO) sector are rising rapidly.

AVIC I’s Shanghai Aircraft Manufacturing Factory operation, which is responsible for the final assembly of the ARJ21 civil craft, will become part of a listed company, AVIC I Commercial Aircraft Corporation (ACAC), whose shares will be sold in China and on foreign stock exchanges.

The operation of Xian Aircraft Industry Corporation will be reorganized as a listed business that will later become the core of a civil manufacturing group encompassing the civil facilities at the Chengdu Aircraft Industry Corporation and Shenyang Aircraft Industry Corporation.

The author of this long and detailed article is Dr Eugene Kogan who is a guest researcher at the Research Institute of the German Council on Foreign Relations in Berlin. He is a defense industry analyst with expertise on Russia, Eastern Europe, Israel and China.

The full article first appeared in The Jamestown Foundation and is used by Asia Times with permission. To read the quite extensive and very clearly written piece click on Source. It forecasts a seriously important growth period for the China aviation construction industry.
Source: Asia Times