Dalian Airport

Dalian, Harbin and Shenyang airports propel China's northeast revival as region to see largest FDI

Those in the know are aware that China's new growth is out in the west, in cities like Chongqing, where Finnair launched services in 2012, or Chengdu, which British Airways will serve later in 2013. This singular focus on the frontier west, however, obscures China's northeast: a growing section in China's corner that many are unaware of or assume that, being in eastern China, it has slower growth.The former rustbelt region is movign ahead.

The region is anchored by Liaoning province, which is not only growing but forecast by the Economist Intelligence Unit to be China's largest recipient of foreign direct investment by 2014.

The key airports are Dalian and Shenyang in Liaoning, as well as Harbin, in neighbouring Heilongjiang province. Yet, despite the strong growth indicators, the outlook for international air services is mixed. Certainly, this is China and growth there will be strong, but relative to other regions, perhaps not as enticing. Liaoning and Heilongjiang are in the thick of northeast Asia, a mere one or two hour flight from mega-hubs at Tokyo Narita and Seoul Incheon, whose hometown carriers have a large presence in northeast China as they can efficiently provide connections.

In mainland China's de facto international hub, Hong Kong, typically expansionist Dragonair does not serve any of the northeast airports. Lufthansa serves Shenyang, which SIA's Scoot will soon serve as well.

New routes to China to flourish in the next few years

China's leading airports are on the cusp of strong international growth, with several new routes to be launched in the coming 12 to 24 months. Growth will be driven by foreign and local needs: countries will have greater needs to further link with China while locally there will be an increasing propensity to travel among the Chinese population as incomes rise, while high-speed rail expansion will push Chinese airlines to grow internationally, at the same time providing feed opportunities for foreign carriers at the main Chinese gateways.

But growth is not only expected at the main Chinese hubs. Second tier airports can also look forward to increasing air services as the Government supports expansion from these hubs and as the LCC revolution takes hold in North Asia. New carriers across the region will be looking for new route opportunities, fuelling rapid growth at non-congested Chinese gateways. China's own second tier airlines are also looking to expand abroad, mainly within the Asia Pacific region, which will spur development at the provincial capitals across China's vast interior and economic zones.

Air China subsidiary Dalian Airlines covers a key strategic position in northeast China

Air China start-up Dalian Airlines commenced operations on 31-Dec-2011, marking another milestone in the flag carrier's expansion of its domestic footprint. A bastion of China Southern (following its takeover of China Northern in 2003), Dalian Airport is a key northern gateway, with strong trade links to neighbouring Japan and Korea - which feature in Dalian Airlines' future expansion plans. The focus on the north-eastern region also reflects a shift in domestic network development patterns in China in light of increasing competition from the high-speed rail (HSR) network. Shandong Airlines, Hainan Airlines and China Southern Airlines have separately stated they will increase services to/from China’s north-east and north-west regions.

With the establishment of Dalian Airlines, Air China, is expanding its domestic and regional presence through a subsidiary operation. The complex ownership structure of subsidiaries is common among the ‘Big Three’ carriers in China, while HNA Group also has a convoluted subsidiary and ownership structure, in addition to a branch carrier network.