Juneyao Airlines

Shanghai Pudong Airport to have new slots. Allocating them strategically will help shape its future

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.

Juneyao Airlines continues international expansion in North & Southeast Asia, and seeks partners

China's Juneyao Airlines is continuing the progressive international expansion it commenced in 2012, further diluting its mainland domestic market service (excluding "regional" services to Hong Kong and Macau). Thailand is so far a focus, with the country's leisure nature appealing to the privately-owned, and all-A320 family, operator's target market, of consumers in the high-income Shanghai area seeking a boutique service for leisure needs. Juneyao's 158-seat A320s have 150 economy and eight first class seats. The carrier also sees corporate traffic, but downplays this so as to avoid conflict with the state-owned carriers which receive preference on international routes.

Juneyao had considered services to Japan's resort island of Okinawa, but this has fallen out of favour due to political tensions between China and Japan. Chinese carriers are turning their attention to Southeast Asia as they seek new markets, and the region offers year-round pleasant weather. Juneyao is also expanding in South Korea and is considering a presence in Singapore. Juneyao hopes these services will raise its international profile and attract potential partners to work on international routes or feed passengers onto Juneyao's domestic network based around Shanghai. Juneyao is the 13th largest domestic carrier in China and has a fleet of 29 A320s, of comparable size to Virgin America, which has been able to attract international partners.

Spring Airlines, nearing 10 million pax p/a, looks to leverage agility and grow where permitted

Spring Airlines is China’s only notable (international) low-cost carrier and a successful one at that, having recently taken delivery of its 35th aircraft. One of China’s few private carriers, it is still a third the size of the AirAsia or Jetstar Groups, but that is largely a result of Beijing’s tight control of fleet growth. No doubt without this restriction Spring would grow even faster.

In 2013, when Spring will carry more than 10 million passengers for the first time, the carrier will look to expand its presence in Hangzhou, 90 minutes west of Shanghai and boasting incomes higher than those in China’s financial capital. Spring’s expansion announcement was quickly followed by competitors Air China and low-cost Juneyao. While the domestic market remains the staple for Chinese carriers including Spring, Spring has expanded regional routes to Hong Kong, international services and is looking to establish a subsidiary in Japan to accelerate growth.

China's Big 3 airlines shaken out of status quo by a cooling Chinese economy

China's domestic aviation market is vast, even mystifying. Although 12 mainland carriers have scheduled international services – the largest amount for any country besides the United States – most have a low profile externally, where China’s top four airlines comprise 86% of international seats.

And then there are another 11 mainland carriers still nestled within China’s boundaries, giving the country 23 scheduled carriers compared to the 27 in the US, still a much larger market.

Overall, China’s domestic market is half the size of the US, but through expansion, consolidation and more expansion, China has created three formidable main carriers as well as more balanced medium and small carriers. The top 10 carriers in the US account for 96% of domestic capacity, but in China the top 10 represent 87%.

The average top 10 US carrier has 54% more domestic seats than the average top 10 Chinese carrier, but the 11th through 20th biggest Chinese carrier has 40% more seats than its respective US counterpart.

The following is Part 2 of extracts from the special China edition of Airline Leader, CAPA’s management journal for CEOs. Please click on the side panel on this page to obtain full access to the soft copy.

Juneyao Airlines, China's boutique carrier, expands internationally and looks for partners

There are some 30 airlines in China and almost all of them are affiliated with one of the country's main four airline groups: Air China, China Eastern, China Southern and Hainan Airlines.

An exception is Juneyao Airlines, independently and privately owned. It has found a successful niche operating as a quality premium leisure, or boutique, carrier based at Shanghai, the epicentre of new wealth in the country. Juneyao also carries business traffic, but is perhaps willing to understate its importance in that market so as not to draw attention – and possibly interference from an over-zealous regulator. 

The carrier is now targeting a few strategic developments. It has commenced scheduled international operations with a service to Thailand's Phuket and is looking to export its model beyond Shanghai to other bases in mainland China.

But of greatest relevance to the industry is its aspiration to develop a series of partnerships – from marketing to codeshare – to increase traffic flows. It boasts a strong product and network from Shanghai, which most international carriers serve.

Chinese LCC international expansion gathers pace as Juneyao and Spring Airlines open new routes

The nascent international LCC footprint of Chinese low-cost carriers will grow as Juneyao Airlines in Aug-2012 opens routes to Japan, becoming the second Chinese LCC to have services beyond China. The first was Spring Airlines with services to the Tokyo area, and Spring intends to open new Japanese cities but first will reportedly bring new countries – South Korea and Thailand – to its route map.

Both carriers are based at Shanghai, are privately owned and are preparing for IPOs. Their operation alongside the three big state-owned carriers does not enjoy a transparent framework, and as the state-owned carriers use the short-term future to bolster domestic performance, Juneyao and Spring may find more favourable support for international services, which in turn balance the international LCCs that serve China. Juneyao's international network is in its early days, but so far it appears to be targeting more leisure destinations whereas Spring is pursuing service to populous cities.