China Halts Aircraft Orders Due To Overcapacity

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The booming aviation market in China -- expected by some manufacturers to support nearly 15 percent of worldwide demand for mid-sized commuter and airline jets over the next two decades -- has gone bust, at least for now, upon news that the Civil Aviation Authority of China has halted all future aircraft orders until overcapacity within the country can be resolved. That condition means that manufacturers like Bombardier, which had expected significant Chinese orders for its CSeries aircraft, can only count on existing orders to be honored as forecasts for future orders fall into question. Running a reported $758 million loss and stuck with reduced demand (passenger numbers dropped more than 6% year over year for the month of October), huge losses on fuel hedges and expensive mergers, the Chinese government has sunk about $541 million into just one of its airlines. The government is planning bailouts for other Chinese airlines, according to the Financial Post.

The situation is a huge turnaround from predictions that called for rapid expansion of air travel and has now left the Chinese fleets overpopulated in a depressed economy. The Chinese government is reportedly considering lowering fuel prices for its state-owned carriers and cutting taxes imposed on the airlines until demand catches up with seat availability.