China Eastern Airlines
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- 2550 Hongqiao Road, Hongqiao International Airport
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- Shanghai Pudong Airport
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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
3,319 total articles
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There has been considerable interest in 2014 from the higher profile of aircraft lessors based in Asia, and specifically the emerging sector in China. A number of existing Chinese leasing companies are are being joined by new ones, including some affiliated with airlines, such as China Eastern and Spring Airlines. The move by Hong Kong billionaire Li Ka-shing and his Cheung Kong Holdings to enter the leasing sector has further stimulated interest for consumers looking to invest outside the traditional, and waning, property area.
Airbus firm orders from all lessors for the first ten months of 2014 have outpaced those of Boeing, but so far Asian lessor orders are about in line with 2012 levels at Airbus. Boeing meanwhile is accruing an increase in direct, disclosed orders from Asian lessors. Asia holds the single largest order backlog of commercial aircraft, with 3,517 according to CAPA's Fleet Database.
Opportunities within Asia could be mixed, although airline behaviour is changing: Chinese carriers are giving preference to Chinese lessors while Korean Air has only 17% of its fleet leased compared to 39% at Singapore Airlines and 67% at Qantas.
It is not often that a lick of paint is so momentous. When China Eastern Airlines – China’s second largest carrier and the world’s eighth largest by seats – unveiled its new livery, it marked an important step. The details of the branding are the minor part; the major fact is that in China’s slow-moving legacy environment of national carriers where the state has a heavy hand, China Eastern was able to implement change. Competitors, still wearing their old coats, are jealous. This is China Eastern's first re-branding since its establishment over 20 years ago, and the first major one among China's airlines.
The branding itself is the visible signal of strategic change. A more material one is due to arrive with the 24-Sep-2014 delivery of the first of China Eastern’s 20 777s for long-haul growth, mainly to North America. China Eastern’s lagging performance has made its Shanghai hub vulnerable, albeit one of China's most important. Further, China Eastern is the first – and so far only – state carrier to launch an LCC. Even more disruptive, in its low key way, is China Eastern’s discussion of finding a strategic investor.
The strategy may be relatively fresh but it needs time (perhaps years) to incubate. China Eastern has some way to go before becoming fully commercial; for example, its 1H2014 financial results included domestic load factor gains at the expense of yield - while operating profit was boosted by state subsidies.
Air China’s yields and load factors decreased in almost every market in 1H2014, but its operating result improved as costs, mainly fuel, grew more slowly than revenue increases. Total revenue was also helped by increased government subsidies while the net profit was dragged down by foreign exchange losses.
Higher fuel prices could quickly have soured the lower yields and load factor. Other airlines might not walk this fine line for fear of volatility, but Air China has strategic goals it needs to meet for the government, including aircraft induction that produces growth. Air China will continue growing with a planned 10% increase in the domestic market and 15-16% in the international market.
Air China’s international growth has been strong in North America, and in the slower northern winter 2014/2015 season Air China will selectively reduce frequencies, one of the first series of cuts in the over-capacity Trans-Pacific market.
As the trans-Pacific aviation market develops, traffic expands and new entrants arrive on the scene, there are predictablity changes in the ways passengers and freight move across this potentially vast long-haul market. One of the largest changes is occurring as Tokyo is bypassed.
US airlines in particular are resorting to use of the new direct rights - and new equipment - which provide them with improved non-stop access into the Chinese market and other Asian points.
This is the last part in a four-part series of analysis reports on the dynamic North Pacific market. The first part focused on Asian airlines, the second part on US carriers and the third part on the growing role of hubs in China.
Unsurprisingly, nearly 80% of the route expansion across the North Pacific in the past five years has occurred at hub airports where behind gateway connections are readily available - although for various reasons those connections are not always accessible on the same terms to Asian carriers, even where they are partners of the North American airlines.
China's emergence is marked by new service - 23% of all frequencies across the North Pacific are today are directed towards Shanghai and Beijing, up from 16% in 2009, while Tokyo has suffered the most notable reduction in flights.
However, as the market develops and as new factors like the introduction of the 787 begin to influence network planning, secondary airports are also starting to benefit. But it is a gradual process. Since 2009 there have been five new North American cities and three Asian airports directly linked for the first time.
Chinese airlines are increasing their commitment to US and Canadian points; and airports such as Shanghai Pudong, home of China Eastern, and Wuhan are offering generous inducements to airlines to add new long-haul service.
North Pacific air route development: Part 2 - US airlines’ risk aversion and Canada's restrictionism
In Part 1 of this report, we reviewed the higher than average traffic growth on the North Pacific over the past five years and the factors behind Asian airlines' route development.
In Part 2 we examine the aeropolitical environment on the Pacific and US airlines’ trans-Pacific roles. Canada's conservative policy is a constraint on Asian airline connections - and on potential air services to Latin America via Vancouver. Meanwhile, China's reluctance to move to open skies with the US limits American carriers' expansion plans.
The resurgence of US airline expansion is made possible not only by the prospect of market growth but also by their reincarnation as lower cost operations following bankruptcy and their subsequent mergers.