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China supports domestic airlines for global alliances as China Eastern joins SkyTeam

22-Jun-2011

Chinese Vice Premier Zhang Dejiang stated the Chinese government supports domestic airlines joining global alliances and encouraged the nation’s airlines to learn from other airlines to improve services and management in order to be more competitive in the global market. The civilian global aviation industry plays a fundamental and strategic role in China's economy, and the government will continue to strengthen exchanges and cooperation with alliances and foreign airlines to promote its rapid development, Mr Zhang said.

SkyTeam becomes largest alliance in Greater China

Mr Zhang made the remarks in a meeting with SkyTeam Airlines President Leo van Wijk as China Eastern Airlines and its Shanghai Airlines subsidiary, a former Star Alliance member, formally joined SkyTeam Alliance on 21-Jun-2011. SkyTeam MD Michael Wisbrun stated the two additions “firmly solidify our position as the number one alliance for the Greater China region”.

With the addition of the Shanghai-based airlines into the alliance, SkyTeam stated it now offers 10% more daily departures to/from the Greater China region. China Eastern and Shanghai Airlines bring 32 new destinations to SkyTeam's global network, including a number of domestic China destinations but also new international destinations in Macau and Colombo. With China Eastern's hub in Shanghai, and current SkyTeam member China Southern's hubs in Guangzhou and Beijing, SkyTeam will now offer services out of the three largest Chinese markets.   

See related report: Before and After: The impact of China Eastern and Shanghai Airlines joining SkyTeam

SkyTeam has the largest presence in China, with a 21% capacity share, due to China Southern Airlines’ membership (the carrier joined the alliance in Nov-2007). This capacity share will increase further with the addition of China Eastern and Shanghai Airlines, with its presence further boosted when Xiamen Airlines joins next year. Star Alliance, meanwhile, has a 17.6% capacity share, due to Air China’s membership. oneworld has a very small presence in the mainland market, but has a strong presence in Hong Kong due to Cathay Pacific’s membership.

China capacity share by alliance (20-Jun-2011 to 26-Jun-2011)

As a member of the SkyTeam alliance, China Eastern and Shanghai Airlines' passengers will be able to transfer to 921 destinations in 168 countries and regions through the SkyTeam network. China Eastern and Shanghai Airlines will be included in all SkyTeam global deals and the alliance FFP with immediate effect. China Eastern launched preparatory work for joining the SkyTeam Alliance a year ago. China Eastern Airliens GM Ma Xulun added that the membership will greatly improve China Eastern's operation, services and networks.

China Eastern becomes the 14th airline to join SkyTeam, which is expected to grow to 19 members by 2012, with the addition of China Airlines, Garuda Indonesia, Aerolineas Argentinas, Saudi Arabian Airlines and Middle East Airlines by 2012. The second largest of the three major alliances, SkyTeam has 14 members, including Aeroflot, Aeromexico, Air Europa, Air France, Alitalia, China Southern, Czech Airlines, Delta Air Lines, Kenya Airways, KLM, Korean Air, TAROM and Vietnam Airlines, operating to 168 countries and regions.

China Eastern Airlines, the country's second-largest airline company by passenger traffic, is the last of China's Big Three carriers to join a global alliance. China Southern Airlines is already a member of SkyTeam, while Air China belongs to the Star Alliance.

Xiamen Airlines receives unanimous approval to join SkyTeam

China has been a hotbed for alliance movement in the past 12 months. Xiamen Airlines General Manager Che Shanglun this month announced that the carrier has formally submitted an application to SkyTeam Alliance signalling the carrier’s intention to join the global alliance. The carrier, a subsidiary of China Southern Airlines, has received unanimous approval from the SkyTeam Alliance Council.

SkyTeam will now form a project team to work with Xiamen Airlines over the next 12 months to ensure the carrier satisfies all requirements prior to joining. Xiamen Airlines is expected to formally join the alliance in late 2012 to mid-2013.

Also this month, it has been reported that Shenzhen Airlines, a majority-owned subsidiary of Air China, is expected to join Air China in the Star Alliance in early Jul-2011. Shenzhen Airlines has already entered into codeshare agreements with several Star Alliance members including All Nippon Airways and Asiana Airlines.

China’s fourth largest airline, Hainan Airlines, remains unaligned, but confirmed to The Global Times in Jun-2010, that it is pursuing a global alliance membership to reinforce its position. "The company has considered joining one alliance for a long time. Joining the alliance is a double-edged sword, but the opportunities in an alliance outweigh the challenges. It is just like joining the WTO - we enjoy rights and obligations at the same time,” the carrier’s public relations manager Lu Feng stated.

It is widely speculated that Hainan will join oneworld, the only alliance without a mainland partner. It has been speculated that Cathay Pacific, which competes with HNA subsidiary, Hong Kong Airlines, in the Hong Kong market, could be Hainan's sponsor if the Haikou-based carrier reached a future membership agreement. Hainan held negotiations with oneworld in 2006, but the talks failed owing to the carrier's weak profitability at the time.

More resources: Read the Airline Leader special report: Global airline alliances: transformed by antitrust immunity, but confronted by uncertainty


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