Illustration: Chen Xia/GT

Recent industry statistics have shown the continued expansion of Chinese passenger aviation, both in terms of the number of planes and number of passengers. Boeing, Embraer, and Airbus have been selling more and more planes to China, making it one of their most important markets.

However, unlike many countries, China's aviation market is isolated. Efforts to create a Chinese aircraft maker have not advanced, and few Chinese companies are among the world's top aerospace players. Ironically, this means that the Chinese aviation market is somewhat independent from the global market, given its sheer size. This is a double-edged sword.

On the one hand, the speed at which the Chinese middle class is growing means a steady flow of new potential air travelers. On the other hand, while Chinese aviation is largely immune from global problems facing the aviation sector, its main airlines are not fully participating in the global market.

Over the last decade, China's major airlines - China Eastern Airlines, China Southern Airlines, Air China and Hainan Airlines - have grown consistently at double-digit rates. Their colors have become ubiquitous at major airports alongside European, American and Middle Eastern carriers. However, this is an illusion. For example, around 80 percent of China Southern's revenue passenger kilometers (RPK) came from domestic flights last year, according to its 2014 financial report. This imbalance has seen Chinese airlines investing far more in domestic growth, rather than international expansion. This might seem counterintuitive to industry watchers who see the staggering potential growth for Chinese overseas travelers.

However, two important factors have restricted this. First of all, this has been part of a knowing strategy by the airlines. With some exceptions, the rule that domestic flights are far more profitable than international ones hold true. Shorter flights cost less in fuel, maintenance and man-hours. Furthermore, the domestic aviation market is booming, with millions of first-time Chinese travelers taking to the skies every year. In 2013, just under 353 million flyers passed through China's airports, up from 262 million in 2009.

The second aspect is that the Chinese government, while looking increasingly favorable on international tours, has been actively encouraging domestic tourism. This sector has also been growing at a double-digit rate and now contributes 4 percent of China's GDP. Furthermore, foreign tourists coming into China actually add more to the profitability of domestic flights than international flights. Over the next few years, it is predicted that an annual average of 43 million new tourists will visit China from abroad, accounting for a hefty chunk of aviation revenues and profits.

However, if domestic flights are seen as a steady source of growth, the airlines must now tackle another challenge: competition. For decades, the major Chinese airlines were the supreme rulers of the Chinese skies - at least the portions of it open to civilian aircraft.

However, just as China enters a new aviation five-year plan from 2015, a slew of smaller carriers have popped up. For the moment, none of these pose any sort of a threat to the big airlines, but based on global experience, they will grow quickly. As part of President Xi Jinping's desire to root out corruption and encourage investment, Beijing has been encouraging private investment into aviation. The examples of EasyJet and Ryanair in Europe and, perhaps more relevantly, AirAsia in Southeast Asia, show a profitable business model that China lacks. The country's size and proximity to a number of Asian destinations make it ideally suited for a low-cost airline. As much as Tony Fernandes, the CEO of AirAsia, would like to crack the Chinese market, the lengthy negotiations for his airline to even get a berth in Beijing prove this will not be the case. No, it is far more likely that either one of the new start-ups will emerge as a viable budget flier or, perhaps, that one of the major carriers invests in a subsidiary for this market.

Overall, there is not much to worry about regarding Chinese aviation. In 2013, China Eastern, China Southern and Air China alone bought more than 200 aircraft. Analysts expect the country will receive a minimum of 300 aircraft a year for the next 20 years. Questions remain about how the market will develop. Will the Big Four remain dominant? Will the government seek to protect the State-owned enterprises and block new entrants? Will private airlines receive enough access to financing to compete? These questions, and many others, are those that industry analysts are waiting to have answered.

The author is editorial director of Mexico Business Publishing. bizopinion@globaltimes.com.cn