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Air China to expand European presence, further becoming largest Chinese airline on the continent

17-Feb-2013

Air China is building on its reputation as China's flag carrier with an expanded schedule to Europe, increasing frequency on existing services and also opening two new routes: Beijing-Geneva and Chengdu-Frankfurt.

Air China's service will be the first Chinese one to Geneva while Chengdu-Frankfurt represents the first route from a Chinese carrier originating in a secondary Chinese city. Several secondary Chinese cities - many of them very large - are growing faster than traditional coastal areas and have also been the expansion target – out of opportunity and necessity – of European airlines.

Air China, which of China's 'Big Three' has the largest portion of its capacity in international markets, will cement its position as the largest carrier between China and Europe, and twice that of its nearest competitor (and Star Alliance partner), Lufthansa. Air China is also the seventh largest carrier between Europe and Asia-Pacific, thanks to its service to a number of smaller European cities, where it holds market leadership, unlike in major cities where it is typically overshadowed by Europe's main hub carriers.

Air China will open new service to Geneva and the first European flight from western hub at Chengdu

Air China's announcement of new services from Beijing to Geneva from 07-May-2013 with four weekly A330-200 services and three weekly Chengdu-Frankfurt A330-200 services build on its status as the largest carrier between China and Europe. The additional services follow a number of long-haul flights into China that were announced in late 2012 and early 2013.

See related article: China enters 2013 with new long-haul routes from BA, Finnair, Hainan, Qatar – and more to come

Top 10 Airlines between Europe and China ranked on seat capacity: 01-Jul-2013 to 07-Jul-2013

Rank Airline   Total Seats
1 CA Air China 57,232
2 LH Lufthansa 28,048
3 AF Air France 24,752
4 CZ China Southern Airlines 18,988
5 MU China Eastern Airlines 18,968
6 SU Aeroflot 18,672
7 KL KLM Royal Dutch Airlines 14,124
8 TK Turkish Airlines 13,300
9 AY Finnair 11,648
10 HU Hainan Airlines 10,860

Air China is also the seventh largest carrier overall between Europe and Asia-Pacific.

Top 10 airlines between Europe and Asia-Pacific ranked on seat capacity: 01-Jul-2013 to 07-Jul-2013

Rank Airline Total Seats
1 LH Lufthansa 108,128
2 AF Air France 74,404
3 TK Turkish Airlines 73,706
4 SQ Singapore Airlines 69,156
5 TG Thai Airways 65,258
6 BA British Airways 62,534
7 CA Air China 57,232
8 SU Aeroflot 50,284
9 CX Cathay Pacific 47,226
10 AY Finnair 45,080

Air China's Beijing service is the first Asian one for Geneva, Switzerland's second city typically overshadowed by Zurich, and represents another secondary European city for Air China. Geneva will mark Air China's 12th European city (and 13th European airport; Air China serves London's Gatwick and Heathrow airports).

Air China's Chengdu-Frankfurt service is perhaps more strategically notable. Chengdu is the capital of Sichuan Province in western China and home to some of the highest growth in mainland China now that the country's traditional coastal growth areas are being relatively saturated. Etihad and KLM serve Chengdu, and in late 2012 British Airways and Qatar Airways announced they too would open flights to Chengdu. Not only is Air China tapping into growth, Chengdu's geography in western China can make connections more efficient: Frankfurt to Hangzhou, for example, via Chengdu is 450km shorter than via Beijing.

Connections are more favourable for western cities: Kunming from Frankfurt is 1,500km shorter via Chengdu than Beijing. The Chengdu-Frankfurt flight ties in to China's "Go West" economic programme.

Air China routes from Chengdu: Jun-2013

Air China's presence at Chengdu meshes with Chengdu Airport's aspirations to be a network hub and is part of the airline's hub strategy of having a base in every major corner of the country: Beijing, Chengdu and Shanghai. China Eastern and China Southern replicate this strategy: China Eastern has a hub in Kunming while China Southern is far out west in Urumqi. Air China's Chengdu-Frankfurt service is the first from a Chinese carrier to a European point from a 'secondary' Chinese city (Chengdu's population is around 14 million). It is also one of the first intercontinental services offered by a Chinese carrier from a secondary Chinese city; others include Sichuan Airlines' Chengdu-Shenyang-Vancouver and China Eastern's Nanjing-Sydney. Sichuan Airlines will also commence connections to Melbourne in Australia later in 2013.

European carriers have led development in routes to secondary Chinese routes, out of opportunity but also necessity: Beijing and Shanghai are largely out of slots except for services during peak hours. Slots that become available are typically dispensed to Chinese carriers while they are also able to shift their slot portfolio around, such as re-allocating a domestic slot for an international flight if that is where expansion is occurring.

Although China's so-called 'Big Three' – Air China, China Eastern and China Southern – are all state-owned, Air China is the flagship and seen as a representation of China abroad. Of the Big Three, Air China deploys the most of its capacity (measured in ASKs) in international markets, although China Eastern is in very close second. China Southern in 2009 made a big push to increase its internationalisation, which has culminated with its much-discussed increased capacity to Australia, as well as Europe.

Air China, China Eastern and China Southern ASK distribution: 11-Feb-2013 to 17-Feb-2013

Airline Distribution
Air China
China Eastern
China Southern

Georgia, 'Times New Roman', Times, serif; font-size: 0.8em;">Source: CAPA – Centre for Aviation & Innovata

Air China's European network will also see various frequency and capacity up-gauges across its European network. This follows expansion in its other prime long-haul market, North America.

See related article: Air China builds its N American network while Hainan Air to use A330 instead of 787 to Chicago

Air China is leader overall but has advantage in smaller cities

The way European carriers have lately and largely been shut out of additional services in Beijing and Shanghai, Chinese carriers face challenges in certain European airports – London Heathrow, for example, where China Southern reportedly spent "years" trying to acquire slots.

Out of necessity and opportunity, Air China has looked at linking China with secondary European points, many of which see no other service to China, or even Asia. Air China like its peers wants to have a large role in sixth freedom traffic, using geographically advantageous hubs and potential for a low-cost base to offer an attractive proposition.

Indeed, an Air China marketing campaign in Stockholm focused on raising awareness that Air China flies to points besides China; Japan services were advertised in a Japanese restaurant.

See related articles:

Air China European network comparison: 01-Jul-2013 to 07-Jul-2013

City Air China Capacity Competing Direct Capacity to China Air China leader?
Athens 2x weekly A330-200 via Athens; 948 seats None  Yes
Dusseldorf 4x weekly A330-300; 2408 seats None Yes
Frankfurt

14x weekly 777-300ER to Beijing; 8708 seats

3x weekly A330 to Chengdu; 1632 seats

7x weekly A330 to Shanghai; 3808 seats

China Eastern 7x weekly A330-200 to Shanghai; 3696 seats

Lufthansa 7x weekly A380 to Beijing; 7364 seats

Lufthansa 3x weekly A340-300 to Nanjing; 1452 seats

Lufthansa 3x weekly A340-300 to Shenyang/Qingdao; 1452 seats

Yes 
Geneva

4x weekly A330-200 to Beijing; 1896 seats

None

Yes
London Heathrow (and Gatwick if stated)

7x weekly 777-300ER Beijing;-Heathrow 4354 seats

4x weekly A330 Beijing-Gatwick; 2176 seats

British Airways 7x weekly 747-400 to Beijing; 4396 seats

British Airways 6x weekly 777-200 to Shanghai; 2952 seats

China Eastern 4x weekly A330-200 to Shanghai; 2112 seats

China Southern 4x weekly A330-200 to Guangzhou; 1952 seats

Virgin Atlantic 7x weekly A340-600 to Shanghai; 4424 seats

No (British Airways)
Madrid 4x weekly A330-200 to Beijing, including 2x continuing to Sao Paulo; 1896 seats None Yes
Milan

3x weekly A330 to Beijing; 1632 seats

7x weekly A330 to Shanghai; 3808 seats

None  Yes 
Moscow  7x weekly 777-200 to Beijing; 4396 seats

Aeroflot 14x weekly A330-300 to Beijing; 8456 seats

Aeroflot 14x weekly A330-300 to Shanghai; 8456 seats

Aeroflot 4x weekly 767-300 to Guangzhou; 1760 seats

China Eastern 5x weekly 767-300 to Shanghai; 3120 seats

China Southern 3x weekly A330-200 to Guangzhou; 1464 seats

China Southern 7x weekly 757-200 to Urumqi; 2730 seats

Hainan 3x weekly A330-300 to Beijing; 1752 seats

No (Aeroflot)
Munich 7x weekly A330-200 to Beijing, including 2x continuing to Athens; 3318

Lufthansa 7x weekly A340-600 to Beijing; 4284 seats

Lufthansa 7x weekly A340-600 to Shanghai; 4284 seats

No (Lufthansa)
Paris

7x weekly 777-300ER to Beijing; 4354 seats

4x weekly A340-300 to Shanghai; 1530 seats

Air France 14x weekly 777-300ER to Beijing; 9716 seats

Air France 7x weekly 777-200 to Guangzhou; 3724 seats

Air France 14x weekly 777-300ER to Shanghai; 9716 seats

Air France 3x weekly 777-200 to Wuhan; 1596 seats

China Eastern 13x weekly A330-200 to Shanghai; 6864 seats

China Southern 7x weekly A330-200 to Guangzhou; 3416 seats

No (Air France)
Rome  7x weekly A330 to Beijing; 3808 seats

China Eastern 7x weekly A330-200 to Shanghai; 3696 seats

Yes
Stockholm  7x weekly A330 to Beijing; 3808 seats None Yes 

Source: CAPA – Centre for Aviation & Innovata
Note: Capacity given for return sectors, capacity is approximate

Sichuan Airlines and Xiamen Airlines gear up for European services

Elsewhere with the Big Three, China Eastern is concentrating on expanding frequencies while China Southern looks to hopefully bring its A380s into European markets like Paris. China Southern in 2012 launched a Guangzhou-London Heathrow service.

There are still more growth stories to come. Sichuan Airlines and Xiamen Airlines are evaluating European markets. Sichuan Airlines, based in Chengdu and owned mainly by China Southern (39%) but also China Eastern and Shandong Airlines (itself partially owned by Air China), is reported to be interested in opening a Chengdu-Paris A330 service.

Xiamen Airlines, based in its namesake city, is awaiting 787 deliveries in 2014 to open long-haul routes. The carrier has historically been domestic with limited short-haul international services.

While much growth remains to be unlocked, a stumbling block will be China's one airline, one route policy, the effect of which is evident from major European carriers serving multiple Chinese cities but Chinese carriers typically linking a European city from only one Chinese city, leading them to be overshadowed by their European peers in key, high-yielding cities. Liberalisation, as is well established, leads to growth.


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