OREANDA-NEWS. Chinese airlines will continue to benefit from robust air travel demand over the medium term, Fitch Ratings says. The demand is driven by fast-growing overseas travel as more countries provide easier access to Chinese citizens, consumers' appetite for leisure travel overseas grows, and air travel becomes increasingly affordable. We also expect Chinese airlines to further expand their international route networks.

Air passenger traffic in China has increased strongly since the beginning of 2015. Passenger traffic turnover in terms of revenue passenger kilometres (RPK) rose 15.1% yoy in 8M15, compared with a 11.4% yoy increase in 8M14. The demand for overseas travel has been strong with RPK on international routes posting a 29.1% yoy growth in 8M15, compared with 13.8% yoy in 8M14. The industry passenger load factor improved 1.2 pp in 8M15 to 83.0%.

Chinese travellers are taking longer domestic flights, as they become increasingly accustomed to longer-distance travel. This is evident in the 9.9% yoy increase in the number of domestic passengers in 8M15, which was slower than the domestic RPK growth of 11.4%. It is also possible that travellers have replaced shorter-range domestic flights with journeys on high-speed trains.

In contrast, short-range international routes are gaining popularity as a result of growing consumer appetite and easier visa access to many foreign countries. This trend is obvious as the number of international passengers soared 35.3% yoy in 8M15, higher than the international RPK growth of 29.1% yoy. For instance, travel to Japan and South Korea surged after the two countries relaxed visa requirements for Chinese citizens in January and April 2015 respectively. Many member states of the Association of Southeast Asian Nations have recently also loosened or are planning to loosen the visa access for Chinese citizens, which will boost short-range international travel volumes.

At the same time, air travel has become more affordable, as urban disposable income increased 8.4% yoy in 9M15, while airlines have kept air fares stable due to a healthy demand and lower jet fuel costs. In addition, travel agencies are offering outbound travel packages at more competitive prices to gain shares in international travel market, as the domestic travel market is almost saturated.