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China Eastern to shift some international capacity back to the domestic market amid bleak outlook

20-Oct-2011

China Eastern Airlines’ decision to cancel its orders for 24 B787s, replacing them with 45 smaller B737NGs, reflects a shift in strategy by the carrier and its intention to focus more on short-haul (domestic and regional) operations. The cancellation of the B787 order, one of the largest to date, also reflects its frustration with extended development delays to the B787 programme.

The move came as no surprise. Prior to the order switch announcement, China Eastern executive director Luo Zhuping said the carrier was considering changing its order book to acquire smaller aircraft in light of the outlook for international passenger and cargo demand. It also signals that China Eastern, newly installed in the SkyTeam Alliance, will look to partners to extend its long-haul international network while bulking up its short-haul network. This is a lower risk strategy. Fellow SkyTeam member, China Southern, meanwhile appears to have a bigger risk appetite with its ambitious international expansion plans. China Southern is more exposed to the developing high speed rail network than China Eastern. [1408 words]

Unlock the following content in this report:

Subheadings:

  • Long-haul international expansion more challenging for Chinese carriers in light of global economic slowdown
  • 16% of China Eastern total system seats deployed internationally; largest international operator among Chinese airlinesĀ 
  • China Eastern to take delivery of 45 B737NGs andĀ 15 A330s
  • No other cancellations for B787s at present but more expected
  • China Eastern charts shorter course

Graphs and data:

  • Shanghai Pudong Airport capacity (system seats per week) by carrier: 17-Oct-2011 to 23-Oct-2011
  • Shanghai Hongqiao Airport capacity (system seats per week) by carrier: 17-Oct-2011 to 23-Oct-2011
  • Fifteen largest airlines by international capacity (seats) to/from China: 17-Oct-2011 to 23-Oct-2011
  • International capacity (ASKs) traffic comparison for China Eastern Airlines, China Southern Airlines, Air China: Sep-2008 to Sep-2011
  • International capacity (ASKs) growth comparison for China Eastern Airlines, China Southern Airlines, Air China: Sep-2008 to Sep-2011
  • International passenger traffic comparison for China Eastern Airlines, China Southern Airlines, Air China: Sep-2008 to Sep-2011
  • China Eastern Airlines international vs domestic capacity (seats) share: 17-Oct-2011 to 23-Oct-2011
  • International passenger traffic growth comparison for China Eastern Airlines, China Southern Airlines, Air China: Sep-2008 to Oct-2011
  • China Eastern Airlines international capacity (seats) by region: 17-Oct-2011 to 23-Oct-2011
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