The New (Airborn) Silk Road

There are some interesting new patterns of air trade emerging.

Dubai, for instance, is at work on what will be the world’s largest airport. Emirates Airline, its chief airline, will grow its passenger fleet 14% and its cargo capacity by 17% this year, despite the global slowdown. Emirates plans new routes and is increasing the number of flights on old ones. Over the last five years, the airline has grown 20% annually.

Booming trade with Asia has created demand for increased flights. Whereas in 2000, there were only seven flights connecting the United Arab Emirates to China, today there are over 60 such flights.

Its fastest growing market is Africa, which has grown 17% in the last 12 months as Arab investors and businessmen flock to the continent. Emirates recently added a second daily flight to Lagos, Nigeria. It’s opening new services from Dubai to Durban in South Africa, including 14 tonnes of cargo capacity.

And look at China. China plans to build some 97 new airports by 2020, and will expand older airports. This will cost more than $64 billion. The country has only 147 airports today. So that’s a 66% increase.

We are living amid massive changes in air transportation. The order book of the industry also reflects this. The world’s airline fleet will double over the next 20 years. There are over 24,000 new aircraft deliveries on tap — an order book worth nearly $3 trillion. Passenger and freight demand will nearly triple.

There are some great investment opportunities that spin out of this — and not in the airlines themselves, or even necessarily in the aircraft manufacturers. And while running an airport is a great business, there are few options for investors. I think the greatest opportunity for investors lies in the specialty materials used to make the new planes.

The Daily Reckoning