CAAC confirmed (06-Dec-2011) Shanghai Pudong Airport’s fourth runway and fifth runway project proposals received approval from China’s National Development and Reform Commission on 21-Nov-2011. The CNY2580 million (USD403 million) fourth runway project includes construction of a 3800m runway while the CNY4650 million (USD726.6 million) fifth runway project includes construction of a 3400m runway.
Shanghai Pudong's fourth and fifth runways receive approval
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Airline invasion of the US: Gulf airlines extend into the west, Chinese airlines grow in the east
While US airlines focus on traditional domestic housekeeping, they are largely overlooking the bigger, faster growing – but more risky – long-haul international markets. This short termism may well come back to bite them. In their absence Chinese and Gulf airlines are re-shaping international travel to and from the United States. A decade ago they collectively operated half a million annual seats to the US; in 2014 it is over four million. By nature of demand and technical requirements they initially focussed on the US points relatively closer to home, with Gulf carriers planting themselves on the eastern coast and Chinese airlines on the west coast.
But now the two groups are reaching further inland, with Gulf carriers expanding to the west coast. Emirates will up-gauge its San Francisco service to an A380 while Etihad in Nov-2014 will launch a San Francisco service. Chinese airlines are extending their reach to the eastern part of the US, with Hainan Airlines launching Boston, Air China Washington Dulles and China Southern New York JFK. Gulf capacity quickly overtook Chinese capacity, with Gulf carriers in 2014 having twice the seat capacity of Chinese airlines. In recent years the Chinese growth rate has picked up but is still below that of Gulf carriers.
Air China's 2013 profit suffers due to overcapacity, but long-term goals push 14% growth in 2014
Air China, like most of its domestic peers, remains focused on the long term outcome of China becoming the world's largest aviation market. It is the short term that is challenging.
Domestic economic growth lags the targets set for aviation under previously stronger years. Airport slots remain in short supply and competition is fierce amongst China's airlines, even though the majority of capacity is from state-owned carriers.
The response has been to grow as space becomes available, not as demand requires. This helps satisfy national objectives, where any increase in throughput makes a larger economic contribution than would capacity discipline designed to boost a carrier's financial position.
The outcome of these seemingly conflicting goals is that Air China has performed well in difficult conditions. Its 2013 load factor held up while yields decreased 9%, some of this offset by a change in accounting. Top level results show a 51% decrease in group operating profit to RMB4.1 billion (USD785 million), a 4.2% operating margin, helped along by forex gains. Although 2014 ASK growth will slow compared to previous years, it is still high at 14% overall, driven by 9% domestic growth, 22% international growth and 12% regional growth.