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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Aeroflot 6th freedom Part 2: China service is a strength for a SkyTeam member excluded from JVs
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.
China-UK air service agreement permits growth as Chinese airlines constrained in most other markets
An agreement between China and the UK to more than double their air service agreement is good timing for both sides. Chinese airlines are finding an imbalance: they are taking delivery of widebody aircraft and more Chinese airlines are flying long haul but traffic rights to major markets – the US, Canada, Germany and France – are becoming depleted. Negotiations to add traffic rights have not succeeded, typically due to the foreign side being concerned about accessing Chinese slots or Russian overflight rights.
The agreement with the UK to expand the number of weekly passenger flights from each side from 40 to 100 reflects considerable pragmatism on the part of the UK: British Airways and Virgin Atlantic are not growing in China, and China is a large growth opportunity. The UK has lagged on Chinese tourism. It was only in 2015 that China became the UK's largest inbound market.