Chinese airlines focus on domestic growth while international expansion remains the poor cousin

The growth of China's "Big Three" airlines - Air China, China Eastern and China Southern - has been spectacular. China Southern's RPKs have increased from 20 billion in 2000 to nearly 140 billion in 2012. Outside China, the airlines' growth has generally been noticed in terms of international flights, leading to some misconceptions about the sector.

While the Big Three are increasing international flights, they are also increasing domestic services in the same proportion. Domestic RPKs in 2012 accounted for 79% of China Southern's total RPKs - little change from 2000's figure of 78%.

This is perhaps baffling to those aware of the huge potential of the outbound Chinese market. While the demand exists, Chinese carriers have failed to capitalise on it - and for good reason. International yields are often significantly lower than domestic yields, and international services are often unprofitable. The implication for the international community is huge: China will continue to hesitate to dispense traffic rights until its airlines have stronger performance, which will enable them to balance foreign growth. But many of the problems are well within their power to solve.