China Express Airlines
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Location of China Express Airlines main hub (Chongqing Jiangbei International Airport)
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CAAC: 21 airlines to receive USD68m in subsidies for regional services in 2013, led by China Eastern
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The CAAC has come out with an extraordinary prediction this month: Chinese airlines will nearly double their fleet size to as many as 5,000 aircraft by 2015. In the shadows of a major international air show on home soil, one might expect some bullish sentiment from the hosts. But the comment, by CAAC Head Li Jiaxiang, that the nation's domestic carriers will have an expected combined fleet of 4,800-5,000 aircraft in just five years (from 2,600 at present) is a breathtaking assessment. Even if it's only 50% accurate, aircraft manufacturers big and small are in for a bonanza.
China’s fragmented airline industry is undergoing a shakeup. Merger and acquisition activity is intense – probably more so than any other aviation market in the world. In the space of a few short years, the majority of China’s second tier airlines have, at least partially, become owned or controlled by one of the "Big Three" carriers and/or HNA Group, as consolidation accelerates in China. In this report, CAPA reviews what’s fuelling the feeding frenzy and who the targets are.
China’s second-tier carriers are hard at work at present, rapidly expanding their domestic and (in some cases) international route networks. However, the vast majority of these airlines are now doing so under the control of the "Big Three" carriers and/or HNA Group, as consolidation accelerates in China. As such, China’s airline evolution is at a very interesting stage. Where previously the major airlines: 1) established considerable branch carrier networks to serve diverse geographic areas in China; and 2) eliminated brands of the acquired airlines, they now appear to be looking more strategically at segmenting the market, retaining the second-tier carrier brands, particularly those focused on tourism/leisure markets.
China’s 'big three' airports - Beijing, Guangzhou and Shanghai - may be exhibiting a strong rebound in demand, but some truly breathtaking activity is occurring at China’s second tier airports. Growth rates of 25% and above are commonplace, as are extensive upgrade and expansion projects to keep up with galloping demand. A battle is meanwhile unfolding between airports in Western China for the mantle of that region’s pre-eminent hub, while airlines are adjusting their strategies for serving China’s burgeoning second-tier airport network in the face of rising competition from high speed rail.