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Air China is the flag carrier of China, China's second largest airline after China Southern, with main bases at Beijing Capital and Shanghai Pudong airports. Air China operates a mixed fleet of Boeing and Airbus aircraft, offering over 6,000 weekly services on 243 routes throughout Asia, North America, the Middle East, Europe, and Australia. Air China maintains close strategic relationships with Cathay Pacific and Shenzhen Airlines, as part of its strategy to increase its reach in the southern Chinese market. Additionally, Air China and Cathay have cross-equity interests and have a JV Shanghai-based cargo carrier.
Location of Air China main hub (Beijing Capital International Airport)
Air China share price
1,946 total articles
243 total articles
Hainan Airlines' first 787s go to Chicago, Seattle & Toronto but Air China gets Beijing's key routes
Originally due to arrive in China in time for the country's 2008 Beijing Olympics, the 787 even missed the 2012 London Olympics. Once the aircraft were finally ready in 2012, Chinese certification lagged and then the 787's battery-induced grounding put a further hold on delivery. But now in sight is an end to the saga and start of commercial service of the 787 in China.
Three operators hold 35 orders: China Southern for 10 787-8s, Hainan Airlines for 10 787-8s as well and Air China for 15 787-9s. Xiamen Airlines has a pending order for six 787-8s. China Southern is due to be the first carrier to take delivery and Hainan the second, but Hainan was first to announce deployment plans, which include domestic services and long-haul flights to Chicago, Seattle and Toronto.
But, as a less privileged, private airline, Hainan Airlines could be constrained by its own government on which routes it can use the full 787 fleet, as the airline faces route restrictions out of Beijing, its main long-haul base – as China Southern painfully experienced when it sought to fly from the capital with its A380.
A slowdown in Chinese traffic at the end of 2012 resulting from decreased activity in line with the government’s leadership transition saw Beijing Capital Airport miss a widely-held projection that it would overtake Atlanta Hartsfield airport for the title of world’s largest passenger airport. Beijing remained in the #2 spot after breathtaking growth that saw it enter the world’s 10 largest airports only in 2006.
Growth at Beijing and other major Chinese airports will slow as slots become increasingly difficult to secure. The highest growth amongst major Chinese airports is occurring in China’s west and northeast regions, home to airports including Chongqing, Shenyang and Urumqi.
They are a fraction of the size of Beijing, Shanghai and Guangzhou, which account for 31% of passenger movements, but will increasingly garner international attention.
Australia needs to urgently negotiate expanded international air capacity which is constraining access to services from some of the country’s most important markets in Asia along with the United Arab Emirates. Capacity for several Asian markets, including China, Hong Kong, Vietnam, Malaysia and the Philippines, is fully utilised by carriers from those countries which are important source markets for both tourism and trade.
The Australian Government is being criticised for not negotiating new bilateral capacity to keep pace with demand. Melbourne Airport CEO Chris Woodruff said at the Australian Airports Association convention in Nov-2012: “These agreements provide the framework in which we can go out to the international market and attract new air services to meet the increasing demand for travel to and from Australia. The Government needs to lead from the front on this issue. Our bilateral agreements need to provide plenty of capacity for future growth in passenger numbers.”
Shanghai Pudong expects its fourth runway to be completed at the end of 2013 but new slots are unlikely to be available until some point in 2014. It is not clear – not even to Chinese carriers – how many new slots will be available, but an early estimate of 242 additional movements (121 roundtrips) between 07.00 to 22.00 each day could be possible. A more deciding factor will be how much additional airspace is opened by China's military for the runway.
The majority of the new slots at Shanghai Pudong Airport – and even upwards of 75% – will likely be allocated to China's domestic carriers. China Eastern, based at Shanghai, will have to battle Air China, which is based at Beijing but looking to establish a hub at Shanghai. As the national flag carrier, Air China and its lobbying network may do well. Private carriers Juneyao and Spring Airlines will also look to expand their home bases.
A number of carriers, including LCCs, will seek to move midnight services to daylight hours while any number of foreign carriers will seek to expand their presence or enter Shanghai for the first time. Strategic allocation will help Pudong, but the decision will be heavy, almost entirely, political.
Chinese airline outlook: slot shortages and yield pressures prompt the need for innovative solutions
For some blissful years last decade, China's Big Three carriers – Air China, China Eastern and China Southern – could grow revenue through the relatively straightforward, if operationally exhausting, path of pumping double-digit growth into the market, facilitated by slots at China's key airports.
But now those slots have become scarce, requiring Chinese carriers to seek out new markets – North America and Southeast Asia are the current targets – and also improve yield mix.
The task is formidable. The carriers' rapid growth last decade also involved increasing their international capacity but not necessarily their international experience and marketing, leading to a product and service that may be adequate but unknown or untrusted.
Channels for yield growth are many: Air China's revenue from Star Alliance is 4% and from premium classes about 13%, and many foreign carriers are willing partners. But the required experience from Chinese carriers to take advantage of these streams is not as strong as it is in direct capacity growth. China's carriers will soon discover their business is about more than putting aircraft into the sky.
Air China's hub at Beijing Capital is effectively at capacity for movements between 07:00 and midnight. Consequently the carrier is increasingly using its existing slots to launch international services that support its positioning as China's international flag airline; this also allows Air China to grow revenue, which in 2012 surpassed RMB100 billion (USD16 billion) for the first time. But these services, aside from Taiwan, offer only lower yields and faint glimmers of profitability – unlike the domestic heartland operations.
With Air China's domestic RPKs growing only 0.5% in 2012, the carrier is seeking to assure the market it has domestic growth opportunities left by expanding its hubs at Chengdu and Shanghai, although the latter is also constrained by slots. The Air China Group also has a portfolio of domestic carriers, including Shenzhen Airlines (the country's sixth largest), Shandong Airlines and Tibet Airlines. They account for about a third of the group's domestic revenue and most traffic growth.
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