China Eastern Airlines board secretary Luo Zhuping stated: "China Eastern was most affected when the Shanghai-Beijing high-speed railway opened, so it rebounded most when investors became concerned about the safety of bullet trains" (Shanghai Daily/Bloomberg, 26-Jul-2011). Domestic airlines are expected to regain their market shares from rail competition as air is seen as a safer option in the aftermath of a devastating train accident at Wenzhou City on 23-Jul-2011. However, Mr Lu said passengers in the long term will ultimately choose the means of travel with which they are most familiar. The incident is likely to have a short-term impact enabling airlines to regain market share lost to high-speed rail. The incident will also likely mean that, in the medium term, high-speed railways are unlikely to increase their operating speed. However, in the longer-term, the competitive balance will likely resume, once the safety issues are resolved. Meanwhile, China's government has ordered a two-month inspection of rail safety and fired three officials after 39 people were killed in the high-speed train crash. “We should have a thorough inspection and rectify any possible safety issues,” Rail Minister Sheng Guangzu said.
Chinese airlines regains market share from rail amid safety concerns
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Part 1 of this report on Aeroflot's connecting sixth freedom traffic noted that Aeroflot is the 13th largest carrier of passengers between Western Europe and Northeast Asia, whereas Finnair – whose "Nordic Shortcut" strategy is well-known – is slightly larger and is the 10th largest operator. After Emirates, Aeroflot is the largest airline flying passengers between the regions but is not based in either of them; all the other operators are Western European or Northeast Asian airlines.
This second and final part examines Aeroflot's growing connecting market in depth. Of the airline's connecting Western Europe-Northeast Asian passengers, 54% are travelling to/from mainland China. This correlates with the share of Aeroflot capacity allocated to China. Among Finnair, Turkish and the Gulf 3 "superconnectors", Aeroflot has the fewest destinations in Northeast Asia. Yet its frequency in prime Chinese cities is unmatched. Aeroflot has the benefit of good aeropolitical relations with China while benefitting from other airlines being restricted over Chinese airspace. This may appear to be a short term advantage that will reduce as competition grows.
Yet a review of the city pairs where Aeroflot is the strongest on transfer traffic indicates growth opportunities as more markets are incorporated into JVs and complacency settles in. This may increase already tense relations between Aeroflot and its SkyTeam partners. Pursuing stronger transfer traffic will be a delicate decision for Aeroflot management.
Northeast Asian airlines seek India connections to diversify away from SE Asia, China competition
Aviation has yet to define India’s role in the trans-Pacific growth story. Geography allows connections from North America to India via Europe, the Gulf and – more quietly – Northeast Asia. Northeast Asian airlines have a theoretical advantage linking India with the North American west coast. The challenge they face is fitting a square peg into a round hole.
The presence of Northeast Asian airlines is large in North America but small in India, while Southeast Asian airlines are small in North America but large in India. Cathay Pacific, and to a lesser extent All Nippon Airways, are in the strategic sweet spot, relatively. Growing China-India relations could result in Chinese airlines playing a larger role in this market. The different transit regions available mean that there is competition between partnerships and joint ventures. These pressures could grow as the Indian market continues expanding.