Hainan Airlines becomes a test bed for all-premium operations in domestic China

China's HNA Group continues to find it difficult to identify profitable markets for its three all-premium A330-200 configured with 116 seats, 34 in first class and 82 in business. The aircraft were acquired to fly between Hong Kong and London on subsidiary Hong Kong Airlines, but were removed in Sep-2012 after suffering losses on the route.

While a viable option may have been to reconfigure the aircraft with economy seats, the aircraft have instead been transferred to HNA's flagship investment, Hainan Airlines, and used on domestic sectors between Beijing and Shenzhen, the third busiest route in China and 24th in the world.

Hainan has reported initial load factors ranging between 80% and 94%, but yields have been a challenge. Premium travel in China is still developing, with fares booked in advance not much more expensive than economy. The problem is acute for Hainan's all-premium services, where premium fares are offered at less than half the price of competitors. Despite this, Hainan is considering expanding the service to Beijing-Guangzhou.

Profitability will continue to be a difficult goal, at least until market share and frequencies can be established.