Why the Chinese air transport market can easily double

Air travel is a boring old business in the United States

The industry has gone through decades of ups and downs, eventually becoming the mature industry it is today.

It’s so mature – and fraught with difficulty – that even Warren Buffett, today’s most famous long-term investor, sold all of his airline shares in the first quarter of 2020.

The Chinese airline industry is in a totally different situation right now. It’s not a boring industry … It’s an industry poised for fantastic growth. And it’s not just a coronavirus pandemic bounce game.

Let me explain …

As I mentioned yesterday, China has added new cities at twice the rate of airports. And that makes sense.

You don’t build a new airport until a city is big enough to support it. Building an airport is very resource intensive, and supporting one requires huge operating costs … which can only be justified with a large enough population.

But over time, this trend has created an unusual gap …

Of the 687 Chinese cities, 113 have more than a million inhabitants … compared to only 10 in the United States. Yet the United States has 604 airports with scheduled commercial flights. This is 2.5 times more than the number of airports in China.

This difference would have made sense when China was still an emerging economy. That doesn’t make sense today, however … especially given the growth in Chinese demand for air travel before the pandemic. Looked…

From just 1.5 million passengers in 1978, the Chinese air transport market reached 660 million in 2019. That’s a growth of 440 times … or an annualized growth of 16%. And that still only scratches the surface.

With hundreds of major cities still without airports, China is on the verge of catching up – in a big way. It’s all about numbers …

We are talking about a country of 1.4 billion people. And every year, 10 million of them settle in cities from the countryside. China is experiencing rates of urbanization that America has not seen since the 1950s … and with urbanization comes travel.

But without enough airports, China’s air transport market still has a long way to go before it even reaches half the level of penetration Americans currently enjoy. Take a look at the table below …

As you can see, China’s air transport penetration is not even a quarter that of the US market. It is not even half that of its two Asian neighbors, Thailand and Malaysia.

Yet China is the world’s second-largest market in terms of the total number of passengers carried in 2019.

Today, Beijing has made increasing the country’s air transport capacity a national priority. It’s part of the country’s long-term economic goals, which it sets every five years.

Beijing wants to add at least 30 new civilian airports and expand existing ones. The goal is to achieve an annual capacity of 2 billion passenger trips by 2025, compared to the current 1.4 billion.

The Civil Aviation Administration of China – the country’s equivalent of the Federal Avian Administration of the United States – predicts that China will have 450 civilian airports in operation by 2035. That means China is expected to build about 14 new airports each year, on average, for the next 15 years.

Of course, this is only a general picture. But the story of the growth is clear. You are not going to find this kind of development in the airline industry anywhere else on the planet, especially not on this scale.

It’s an amazing setup for long term growth … maybe better than any big industry in China today.

It’s a story most people wouldn’t expect. American investors certainly don’t see air travel as a growing industry. And it is not a sector that they generally consider to be a peerless artist.

But in China, given the massive changes underway, the airline industry is just that. And it is a sector that is set to experience incredible growth in the years to come.

Good investment,

Brian Tycangco

PS I just wrote about a unique and interesting way to take advantage of this long term growth in China’s air travel industry to Real wealth opportunities: China readers. It is not an airline, nor an airport management company … It is not even an online travel site. But its monopoly in space means it is expected to grow alongside the Chinese air transport market. You can learn how to access this opportunity here.

Further reading

Air travel isn’t the only trend to outstrip growth in the US When it comes to cashless payment options, China is the clear leader. And you want to be sure that you take steps to prepare for the cashless world ahead … Learn more here: This could be the end of cash as we know it.

“It looks like almost every asset has had a banner year in 2020,” writes Brian. But the good times will not last in US stocks. So you will have to look at other markets for profit opportunities … Read more here: This trend doesn’t scare a lot of Americans … but it should.


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