China Eastern Airlines
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- 2550 Hongqiao Road, Hongqiao International Airport
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- Shanghai Pudong Airport
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China Eastern Airlines
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China United Airlines
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Shanghai-based China Eastern Airlines is one of China's 'big three' state-owned airlines, with hubs at Shanghai's Pudong and Hongqiao airports, as well as Kunming Airport in southwest China. The airline operates a fleet of Airbus, Boeing, Embraer and Bombardier aircraft to support an extensive network, serving over 350 domestic routes and 40 international destinations, including cities in Australia, Europe, Korea, Japan, North America and Southeast Asia. China Eastern merged with Shanghai Airlines in 2010 and joined China Southern in the SkyTeam Alliance in Jun-2011.
Location of China Eastern Airlines main hub (Shanghai Pudong Airport)
China Eastern Airlines share price
3,547 total articles
294 total articles
The China-US market continues to grow, as expected, but the segment is showing acceleration in the way that growth is occurring. China Eastern plans to launch Nanjing-Los Angeles service, its first trans-Pacific route from a city outside its Shanghai hub. Hainan will launch a new Beijing-San Jose service, consistent with its secondary city focus, but thicken Beijing-Boston and Beijing-Seattle services with flights to those US cities from Shanghai. Hainan Airlines becomes the first (by two weeks) Chinese carrier to serve a US point from multiple Chinese cities. US airlines already serve Chinese points from multiple US cities.
And Delta Air Lines, normally conservative with long-haul growth, has brought forward a Los Angeles-Shanghai service in its five-year plan to a Jul-2015 start date. Not only is Delta accelerating growth, it is doing so on the most competitive US-China route; it becomes the fourth airline on the city-pair after America, China Eastern and United. Delta attributes its growth to the visa liberalisation between China and the US, which Delta says was a surprise.
At first blush, Korea has much to celebrate. Flagship airport Seoul Incheon International saw a 9.7% increase in 2014 passenger numbers, well above the country's 3% GDP growth rate. Visitor arrivals increased 17%, continuing a streak of near double digit annual growth. These are accomplishments, but Seoul Incheon is worried about falling transit traffic: after over a decade of transit growth, 2014 saw a half million decrease in transit passengers. The share of transit passengers fell to 16% from a high of 18% in 2009.
Driving this is a confluence of events: the "Korean Wave" means Korean Air and Asiana are carrying more point-to-point passengers, traffic rights with key source markets have not been expanded, and once-sleepy Asian airline and airport peers are waking up and taking back the traffic Incheon has attracted. Long-haul growth is occurring out of Beijing, Tokyo, Hong Kong and Taipei. Incheon wants to have 10 million transit passengers in 2017 and is looking for new opportunities, but so far these plans are vague. Incheon may follow Singapore Changi's move to target LCC connections, which Kuala Lumpur has excelled at.
Yet Korea's regulator is overlooking the queue of airlines – from Singapore Airlines to Emirates – that have been asking for more traffic rights. Protecting the nation's flag carriers may come with a price.
China Southern Airlines is Asia's largest airline group with a fleet that in 2014 exceeded 600 for the first time. Yet just five passenger aircraft – albeit the world's largest – have caused a considerable burden. Financially China Southern's five A380s remain under-utilised with a 12 hour utilisation rate in a brief peak season and eight hours for the rest of the year. Maintenance costs are increasing and residual values decreasing as the aircraft clock up short-haul sectors. From a marketing perspective, China Southern's flagship boasts only one year-round international service, to Los Angeles, and a seasonal Sydney service.
The fleet may get a boost if China Southern follows through with consideration about introducing a daily A380 service on its Guangzhou-New York JFK route, inaugurated in Aug-2014 with four weekly 777-300ER flights. Alternatively China Southern could grow in New York with 10 weekly 777-300ER flights. Large growth would continue the interest Chinese carriers have placed in the US east coast but would add to over-capacity (and losses) in the China-US market. Meanwhile, less than an hour away from Guangzhou, Cathay Pacific has five daily flights from Hong Kong to the New York area.
A significant expansion in air traffic rights for Chinese airlines to Australia saw their stock prices jump 3-5%. Ironically, the growth made available from this agreement may mostly be unprofitable, at least in the short term. This explains why China is pursuing gradual liberalisation and not the open skies Australia wants. There is no doubt which group of airlines gain the most: it is the Chinese carriers, who already account for 92% of Australia-China non-stop seat capacity. Qantas, the only Australian airline to operate non-stop, is at 8%.
But Australia is still very much the winner in the bigger picture. Chinese visitor numbers to Australia in the first nine months of 2014 were up 13.4%, and overall volumes more than doubled between 2009 and 2013. As with other destinations in the region, Chinese are quickly becoming a key source market. For Sydney Airport, Chinese passengers account for half of its international growth while at Melbourne Airport China is its largest long-haul market. The expanded agreement is already bearing fruit with capacity additions from Air China and China Eastern as well as a new service from Xiamen Airlines to Sydney expected to be launched before the end of 2015.
China's regulator the CAAC decreed that Air China is the largest carrier in the China-US market, ending the "domination" of US carriers. However this was based on Air China operating to six US cities while the largest US carrier, United, links China with only five US cities.
On almost every other metric – seats, frequency, city pairs – United (Air China's Star Alliance partner) is far larger and will grow in 2015 as it expands its Chengdu service and adds a second daily flight from San Francisco to Shanghai, the first example of a US carrier having more than a daily flight on a Chinese routing.
Perhaps more important though is the fact that the CAAC saw fit to announce the comparison, a clear statement that China's international airlines are on the march, particularly in one of their most important strategic markets.
Los Angeles International Airport has emerged as a battle ground for American Airlines and Delta Air Lines during the last couple of years as the market, while hugely fragmented, retains a high level of importance within the networks of most US major airlines.
But the success of each airline’s recent expansion in Los Angeles is tough to predict. Both American and Delta unsurprisingly declare that their operations in Los Angeles are successful; but the longevity of that success is difficult to predict given the tough competitive dynamics in the market.
The investments each airline is making in Los Angeles obviously carry some risk. But the scenario for American is a bit different given it does not have a true west coast hub for long-haul traffic, and the operating constraints in Los Angeles threaten to constrain its optimal growth path.