China Eastern to shift some international capacity back to the domestic market amid bleak outlook

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China Eastern Airlines' decision to cancel its orders for 24 B787s, replacing them with 45 smaller B737NGs, reflects a shift in strategy by the carrier and its intention to focus more on short-haul (domestic and regional) operations. The cancellation of the B787 order, one of the largest to date, also reflects its frustration with extended development delays to the B787 programme.

The move came as no surprise. Prior to the order switch announcement, China Eastern executive director Luo Zhuping said the carrier was considering changing its order book to acquire smaller aircraft in light of the outlook for international passenger and cargo demand. It also signals that China Eastern, newly installed in the SkyTeam Alliance, will look to partners to extend its long-haul international network while bulking up its short-haul network. This is a lower risk strategy. Fellow SkyTeam member, China Southern, meanwhile appears to have a bigger risk appetite with its ambitious international expansion plans. China Southern is more exposed to the developing high speed rail network than China Eastern.

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