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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)
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2,242 total articles
Air China to deploy Boeing 777 on select Beijing-Hong Kong service during Christmas/New Year holiday
264 total articles
Air Canada reached a milestone in 3Q2013 as its return on invested capital (ROIC) as of 30-Sep-2013 was 10.8% compared with 7.7% at YE2012. The improvement is notable as the company broaches its stated objective of achieving an ROIC between 10% and 13% on a sustainable basis by 2015.
It is a laudable achievement given a couple of years ago the carrier was working feverishly to combat significant financial challenges and battled labour strife throughout much of 2012 in order to forge collective bargaining agreements that it believes will aid in its ultimate goal of sustainable profitability.
Obviously the carrier still has a long road ahead in proving its mettle in regular profitability, but for the moment it seems to be holding its own against increased competitive pressure from WestJet while getting its own new low-cost carrier Air Canada rouge off the ground.
When CAAC vice-administrator Xia Xinghua proclaimed “We urgently need to develop LCCs” at a public forum in Beijing on 5-Nov-2013, it became clear that fundamental changes are on the way for low-cost carriers and the overall aviation market in China.
Within the overriding goal of ensuring stability for the Big Three Chinese flag carriers, it will not be a simple process. One thing is very clear however: the CAAC is serious about introducing significant change in the sector. This includes approving new carriers, reforming airport charges, introducing LCC terminals, changing aircraft acquisition processes and taxes, not requiring approval for new routes, and the ever-topical matter of airspace reform (albeit largely outside its control).
The forthright move is part of a wider commercial agenda of China's new leadership, which meets again on 9-Nov-2013, seeking to find the right formulas to allow greater play of market forces, while maintaining appropriate regulatory backstops. Purists will see this as being half pregnant. For example, in Oct-2013 the CAAC abolished minimum pricing requirements in the domestic market, an important step for LCCs; but price caps remain as a consumer protection measure – despite total price freedom being integral to LCC structures.
But China has repeatedly shown the ingenuity to evolve tailored solutions that fit the very different environment in this enormously complex country. There will be a "China solution" and it will allow more LCC operations – but there will be differences….
Sichuan Airlines, China's fifth carrier to offer international long-haul services, will increase its presence in Australia with a new twice-weekly Chongqing-Sydney service launching 20-Dec-2013 with A330s. The route complements Sichuan's existing Chengdu-Melbourne service and will more easily allow passengers to visit Australia's two largest cities. Short connecting flights between Chengdu and Chongqing will complete the loop. The service will further expand the massive influx of Chinese capacity Australia has seen in recent years, including China Southern's A380 deployment to Sydney in Oct-2013.
Yet to be realised are Sichuan's bold plans to grow in Europe and North America. While the carrier's largest shareholder is the Sichuan government, all three of China's main airlines – Air China, China Eastern and China Southern – own a stake in Sichuan Airlines, complicating its aspirations. Slower growth may be wise: the Chengdu-Melbourne service in its first five months averaged only a 45% load factor. While China's secondary and western cities have geographical advantages for European services, for Australia it will be some time before they mature. This is not helped by the fact that Sichuan does not have an English language website.
The growth of China’s “Big Three” airlines – Air China, China Eastern and China Southern – has been spectacular. China Southern’s RPKs have increased from 20 billion in 2000 to nearly 140 billion in 2012. Outside China, the airlines' growth has generally been noticed in terms of international flights, leading to some misconceptions about the sector.
While the Big Three are increasing international flights, they are also increasing domestic services in the same proportion. Domestic RPKs in 2012 accounted for 79% of China Southern’s total RPKs – little change from 2000’s figure of 78%.
This is perhaps baffling to those aware of the huge potential of the outbound Chinese market. While the demand exists, Chinese carriers have failed to capitalise on it – and for good reason. International yields are often significantly lower than domestic yields, and international services are often unprofitable. The implication for the international community is huge: China will continue to hesitate to dispense traffic rights until its airlines have stronger performance, which will enable them to balance foreign growth. But many of the problems are well within their power to solve.
For all their success elsewhere, the Gulf carriers and Turkish Airlines are looking rather thin in China. This is not by their choosing. Emirates, Etihad, Qatar and Turkish have reached the limit of air rights and slots made available to them.
All are ready to expand, and Turkish has even said it has service to five cities ready to launch if approved. That is probably of little comfort to China. While the country wants a flourishing aviation market, it also wants its airlines to have a fair share. But this is not classic protectionism. The argument is Chinese carriers are still young and need time to gain experience before being on equal footing with peers.
Yet Etihad and Qatar are younger than China’s long-haul airlines. With a mindset change that favours liberalisation in China being unlikely in the medium term, the foreign carriers will have to find ways to stress their value and why they should receive more air rights. Partnerships are one such answer.
United Airlines’ top-line 3Q2013 profit was undermined by weaker unit revenue and yield performance relative to its US legacy peers, a problem that has plagued the carrier for the past year.
The weaker performance is the latest in a string of quarterly results in which the carrier has declared disappointment and pledged that its fortunes will improve. Specific to 3Q2013, the culprits ticked off by the airline included incorrect demand forecast projections, continued pressure in the trans-Pacific and some suboptimisation of its fleet.
To say United has endured a rough couple of years is an understatement. But what the industry and its investors are looking for now is a meaningful improvement in its results that so far has yet to materialise. Three years after the merger’s close the company is still struggling with revenue and cost management – basic tenets of the business that continue to suffer.
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