China Southern transports 66.4 million pax in 2009
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China Southern Airlines deflects yield pressure concerns. Long haul focus shifts to North America
China Southern Airlines may be Asia's largest airline, but it has one of the smallest long haul networks. China Southern has shifted growth to international markets, which represented only 17% of capacity in 2009 but doubled to 34% in 2016. Its long haul plank has been Australia and New Zealand, funnelling traffic from around China down to its southern hub at Guangzhou. China Southern has met its objectives for Australia/NZ and now turns its focus to the market that has preoccupied most other Northeast Asian airlines: North America.
China Southern plans to increase flights from five daily to 11 daily, about the size that ANA is today – and larger than Air China and China Eastern. Although China Southern can build on the principle of using Guangzhou as a North-South hub, North America is a radically different proposition. Guangzhou's southern positioning limits exposure to the Chinese market that China Southern knows best. China Southern will need to target connections to Southeast Asia and India, which have only been a small component of Air China and China Eastern's network.
China Southern and Hainan Airlines evaluate Virgin Australia stake to grow tourism potential
Chinese visitors are reshaping tourism flows and aviation opportunities in many markets. This has been readily apparent in Australia, where China Southern in the space of a few years has become a household name, and Chinese tourists are the second largest visitor source. The next manifestation could be a Chinese airline purchasing the stake in Virgin Australia that Air New Zealand is looking to divest itself of. China Southern and Hainan Airlines are evaluating the opportunity, according to the Australian Financial Review.
China Southern would benefit from a stronger local partner after its previous partner Qantas formed a JV with the rival China Eastern. With every Chinese visitor taking two to three domestic Australian flights, an equity stake could allow the Chinese airline to capture back revenue streams. China Southern could also invest as a defensive move. Hainan serves Australia seasonally and its use of Virgin could be more radical, with an outcome of Virgin flying to mainland China and Hong Kong, accessing routes that Hainan's HNA Group (including Hong Kong Airlines) is unable to serve. Hainan already has an airline investment portfolio but Virgin would be its most significant. For China Southern, a Virgin stake could start state-owned Chinese airlines buying foreign airlines as they seek to be at the centre of most things in the world; including, one day, global consolidation.