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Freeze on buying new aircraft in China

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File photo of China Airlines' first Boeing 747-400 freighters

HONG KONG (BNS): China, the last citadel of hope for the global aviation industry, is showing signs of crumbling. The aviation growth is likely to suffer in the country as the demand for new aircraft is dwindling due to economic meltdown.

The signs of slowdown emerged when Bombardier's Aerospace decided to call off its expansion plan in China. The Bombardier took the decision after China's Civil Aviation Authority announced a halt on all future aircraft orders.

The airlines canít order more aircraft as the country is already battling over capacity. There is no room for more when there are not enough passengers to fly.

The losses of Chinese airlines have crossed $750 million mark and if the trend continues it would soon go beyond a billion dollars. A combination of factors has led to the situation, said analysts. The Asia Pacific region registered a passenger drop of 6.1 per cent during October, according to the data released by the International Air Transport Association.

The bailout package of $541 million released by the Beijing government to China Southern Airlines has been dubbed as inadequate. The government is planning similar deal for Air China and China Eastern, the two major state-run airlines. Lowering of fuel prices is also being considered along with the bail out package to bring the airlines out of crisis.

Despite these measures, the demand for new aircraft might not grow. Aircraft manufacturers had anticipated that the Chinese market would need around 2000 regional aircraft in the next ten years. But that does not seem to be happening now.

Bombardier expects that there would not be any orders from Chinese customers in short to medium term. Talks were on with potential customers but doubts remain if they would order any new aircraft considering the current situation in the market. China already has 1256 aircraft and the number would increase to 1500 in another two years.

The moratorium issued by the state agency on buying new aircraft is also not helping matters. Air China had announced in July that it would buy 45 Boeing aircraft at a list price of $6.3 billion. But it remains to be seen if the order would be executed.

The passenger traffic grew only by 2.4 per cent in the first 10 months of 2008. Even the anticipated 14 per cent growth for the entire year is unlikely to be met. The industry was looking up to the Chinese market for revival but reports so far suggest that the downturn is here to stay for some more time.

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