13-Apr-2011 12:22 PM

China Southern looks 'long' as competition from high-speed rail intensifies

Analysis

China Southern Airlines is accelerating the pace of its international expansion in 2011, building on growth over the past few years, in response to mounting competition from China's expanding high-speed railway network.

China Southern is in the unenviable position of having 80% of its domestic route network, and nearly a quarter of its city pairs, competing with high-speed rail. China Southern Airlines Chairman Si Xianmin stated that of the carrier's 160 domestic routes, 38 are in direct competition with China's high-speed rail.

China Southern's Tan Wangeng stated the Guangzhou-based carrier hopes to boost international operations to 30% of the total routes it operates in 2011, up from 18.5% in 2010. It plans to further increase the ratio to 40%. "It's part of the efforts to build up and enhance our long-haul flights on our global route network. We have set up a tri-hub international route map based on Guangzhou, Beijing and Urumqi," China Southern Airlines VP Beijing branch, Kong Fansheng said.

China Southern confirmed its international expansion from Apr-2011, covering new destinations in New Zealand, Europe and North America. The carrier launched Guangzhou-Auckland service on 08-Apr-2011. The carrier plans to add 40 weekly flights to Oceania this year, and increase flights to more than 110 by 2015. This will be followed by Guangzhou-Amsterdam service on 07-Jun-2011 and Guangzhou-Vancouver service by 15-Jun-2011. The carrier will also increase capacity on Guangzhou-Paris and Guangzhou-Los Angeles sectors. Overall, China Southern Airlines is expected to launch between eight and 10 long-haul international routes in 2011.

China Southern is also seeking to expand into other key international markets as it takes delivery of its first A380 in Aug-2010 and its first B787 in Dec-2011. The carrier will deploy the A380 from Beijing, scheduling the first A380 to launch Beijing-Paris CDG service. The carrier's branding manager stated the carrier is also seeking to launch service between Guangzhou and London and could operate A380 equipment on the sector. The carrier will most likely deploy B787 equipment to either Europe or the US. See related article: Airbus expects A380 sales to rise in China. First A380 to China Southern in Aug-2011

The other two big three Chinese carriers, China Southern Airlines and Air China, are also accelerating their international expansion plans. China Eastern Airlines, for example, launched Shanghai-Rome service on 29-Mar-2011, and plans to increase its ratio of international to domestic revenue from 3:7 to 4:6 by 2015. Air China, meanwhile, launched three times weekly Beijing-Dusseldorf service on 27-Mar-2011, marking the carrier's third destination in Germany.

Double-digit international passenger growth in Mar-2011

In Mar-2011, China Southern reported double-digit international passenger growth, with passenger growth of 14.7% to around 470,000 passengers. International passenger numbers in the month reached the third highest level in the airline's history, behind levels witnessed in Jan-2011 and Aug-2010.

These graphics are produced using CAPA's new on-demand monthly airline traffic database, now covering dozens of LCCs worldwide (over 130 carriers in total). Sign-up for a free trial today.

China Southern Airlines Passenger Numbers (International) (2009 to 2011)

International load factors, however, weakened by 4.2ppts to 72.7%.

China Southern Airlines Total Load Factor (International) (2009 to 2011)

This load factor weakness occurred as international capacity reached all-time record highs, with international capacity (ASKs) in Mar-2011, Jan-2011, Dec-2010 and Nov-2010 exceeding 2.0 billion for the first time in the carrier's history.

China Southern Airlines Available Seat Kilometres (International) (2009 to 2011)

Network passenger numbers increase to 6.4 million pax in Mar-2011

Overall, network-wide passenger traffic increased by a more moderate 1.3% in Mar-2011 to 6.4 million passengers. Year-on-year passenger growth has slowed in 2011, but builds on continued growth over the past few years, with the carrier reporting year-on-year passenger growth in every month since Nov-2008.

China Southern Airlines Passenger Numbers (2009 to 2011)

China Southern's overall passenger load factors averaged 80.6% in the month, marking a 0.8ppt improvement. While load factor growth has moderated, load factors remain considerably stronger than their pre-recession levels of 77.2% reported in Mar-2009 and 76.4% in Mar-2008.

China Southern Airlines Passenger Load Factor (2009 to 2011)

Domestic passenger growth moderates

Around 91% of the carrier's passenger numbers are domestic passengers. Domestic passenger numbers increased only marginally in the month, by 0.1% to 5.8 million, with this marking the slowest pace of domestic passenger growth since passenger levels slumped 15.5% in Sep-2008. Domestic load factors however improved 1.5ppts to 82.5%.

China Southern Airlines Passenger Numbers (Domestic) (2009 to 2011)

China Southern Airlines Passenger Load Factor (Domestic) (2009 to 2011)

Double-digit regional growth in Mar-2011

Regional passenger numbers improved significantly in the month, increasing 15.7% to slightly under 140,000 passengers. The double-digit increase follows on from a slight year-on-year reduction in Feb-2011. Load factors on these sectors increased 0.7ppts to 75.5% after declining on a year-on-year basis in Feb-2011.

China Southern Airlines Passenger Numbers (Hong Kong And Macau) (2009 to 2011)

China Southern Airlines Passenger Load Factor (Hong Kong And Macau) (2009 to 2011)

Cargo volumes increase after declining over Chinese New Year

Cargo volumes increased 7.3% to 97,460 tonnes in the month, after slumping in Feb-2011, due to reduced demand over Chinese Lunar New Year.

China Southern Airlines Cargo Volume (2009 to 2011)

APPENDIX: China Southern Airlines Mar-2011 traffic highlights