Chengdu Airport

Air China turns attention to international markets, but its profits are regional and domestic

Air China's hub at Beijing Capital is effectively at capacity for movements between 07:00 and midnight. Consequently the carrier is increasingly using its existing slots to launch international services that support its positioning as China's international flag airline; this also allows Air China to grow revenue, which in 2012 surpassed RMB100 billion (USD16 billion) for the first time. But these services, aside from Taiwan, offer only lower yields and faint glimmers of profitability – unlike the domestic heartland operations.

With Air China's domestic RPKs growing only 0.5% in 2012, the carrier is seeking to assure the market it has domestic growth opportunities left by expanding its hubs at Chengdu and Shanghai, although the latter is also constrained by slots. The Air China Group also has a portfolio of domestic carriers, including Shenzhen Airlines (the country's sixth largest), Shandong Airlines and Tibet Airlines. They account for about a third of the group's domestic revenue and most traffic growth.

Chinese air cargo shifts from Shanghai to the Three Cs: Chengdu, Chongqing and CGO

The central Chinese city of Zhengzhou may seem obscure, but it is estimated to produce half of the world's iPhones. It is part of the story of Chinese manufacturing shifting from traditional coastal areas to central and western China, where wages are lower. That in turn is contributing to new air services and is directly impacting freight, with demand moving to what Cathay Pacific terms the "Three Cs": Chengdu, Chongqing and CGO (the airport code for Zhengzhou). This trio of cities has collectively overtaken Shanghai as Cathay's largest Chinese freight market.

Volumes at Zhengzhou, the smallest of the three, grew over 40% in 2012 while Chengdu saw steady growth and Chongqing double-digit growth. Shanghai saw single-digit percent decreases.

More resources are being put into establishing Chengdu and Chongqing as western capitals for China, and passenger services have flowed, with British Airways and Qatar Airways the latest to announce service to Chengdu. Finnair and Qatar already serve Chongqing. Zhengzhou maintains a less diversified economy and so sees a heavy presence of dedicated freighters and no intercontinental services.

Air China to expand European presence, further becoming largest Chinese airline on the continent

Air China is building on its reputation as China's flag carrier with an expanded schedule to Europe, increasing frequency on existing services and also opening two new routes: Beijing-Geneva and Chengdu-Frankfurt.

Air China's service will be the first Chinese one to Geneva while Chengdu-Frankfurt represents the first route from a Chinese carrier originating in a secondary Chinese city. Several secondary Chinese cities - many of them very large - are growing faster than traditional coastal areas and have also been the expansion target – out of opportunity and necessity – of European airlines.

Air China, which of China's 'Big Three' has the largest portion of its capacity in international markets, will cement its position as the largest carrier between China and Europe, and twice that of its nearest competitor (and Star Alliance partner), Lufthansa. Air China is also the seventh largest carrier between Europe and Asia-Pacific, thanks to its service to a number of smaller European cities, where it holds market leadership, unlike in major cities where it is typically overshadowed by Europe's main hub carriers.

British Airways considers secondary Chinese cities, possible codeshare with China Southern

British Airways (BA) looks increasingly likely finally to enter secondary Chinese cities, becoming the last major European carrier venturing beyond the main gateways to lesser known destinations – but with populations greatly exceeding those of European counterparts. London Heathrow slots gained from the acquisition of bmi and the introduction of additional long-haul aircraft, including the Boeing 787, are bringing cities – as flagged by BA – such as Chengdu, Chongqing, Guangzhou and X'ian into focus as candidates.

BA has also struggled with finding a mainland partner carrier, but now looks likely to find a solution with a codeshare with SkyTeam's China Southern.

The potential partnership adds to the alliance rethink that BA, and parent company IAG, are going through as they seek to adjust to a new world order. Qatar Airways, at the welcoming of IAG's Willie Walsh, is expected to join the oneworld alliance, with an announcement possibly merely weeks away.

Asia Pacific airports move up the ranks in 2011, with Beijing this year to overtake Atlanta

The rankings of the world’s busiest airports for 2011 show key developments and lasting changes in global aviation, although the world’s busiest airport by total passenger movements, Atlanta Hartsfield-Jackson International Airport, continued to hold off Beijing, the world’s second busiest airport, in 2011, according to Airports Council International (ACI). It is, however, expected that Beijing, driven by exponential GDP growth, will overtake Atlanta in 2012, ending the airport's 14-year reign in the top spot.

While Beijing Capital is the dominant airport in China, it is on track to become be the world’s busiest hub by the end of this decade, leaving London and even ambitious Dubai in its wake. And new developments will ensure the city of Beijing has an airport in the top spot: its new airport at Daxing, south of Beijing, could have up to nine runways and ultimate capacity to handle around 370,000 passengers per day, or a staggering 135 million passengers p/a. This would increase capacity at Beijing area airports to around 220 million p/a – almost a quarter of a billion passengers.