Hainan Airlines revealed at the IATA annual meeting plans to commence negotiations with global airline alliances as it seeks to expedite its international expansion (Yicai.com, 08-Jun-2010). The carrier has not revealed which alliance it hopes to join. According to Hainan Airlines, Cathay Pacific was an obstacle to it joining oneworld several years ago and remains against the carrier joining the alliance today. Any mainland carrier wishing to join oneworld will need Cathay to act as a sponsor airline. Air China is a member of the Star Alliance while China Southern Airlines and China Eastern Airlines have announced their membership with SkyTeam.
Hainan Airlines seeking to join global alliance, Cathay still an obstacle
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Beijing's second airport at Daxing: risk of unproductive competition, China Eastern the big winner
The most important regulatory development in Chinese aviation in 2016 – and possibly one of the top for the decade – was awarding China Eastern Airlines home carrier status for Beijing's second airport, Beijing Daxing, due to open in 2019. There are usually few surprises in Chinese aviation: if word does not leak out, it is softly dripped. But few expected that China would award China Eastern in this way. China Eastern is due to become the only Chinese airline with dual home hubs in Beijing and Shanghai, granting a remarkable advantage.
Rather than allow airlines to operate from both airports, Air China and its Star Alliance partners will remain at their existing Beijing Capital hub and benefit from significant slot growth. China Eastern, China Southern (which was also named base carrier at Daxing) and SkyTeam partners will gradually move to the new Beijing Daxing.
Yet this move, expected to be backed by added traffic rights, risks the two airports competing with each other rather than singularly growing the Beijing hub, which has better geography as a connecting point for Europe and North America. China Eastern may indirectly receive a second victory: fragmenting Beijing adds relative strength to China Eastern's hub at Shanghai, where it is the only intercontinental home airline. China can make sweeping policy changes, but until then China Eastern's advantage is undeniable.
Chinese New Year air traffic a boon to airlines but reflects challenges of year-round sustainability
The Chinese New Year travel season, billed as the world's largest migration, once again fills the headlines with astounding numbers of passenger movements. Some airlines set maximums on pricing, for fear of being seen as price gouging if revenue management systems followed their normal pricing curve upwards.
Even the most sceptical investors would be forgiving for contemplating airline ownership during the travel rush. The question, and lurking problem, is what happens the rest of the year.
China's concentrated and en masse travel periods present a challenge for sustainability. Airlines local and foreign are often reduced to hoping that routes will be annually profitable based on a few weeks of travel during Chinese New Year, the brief summer peak, and the autumn holidays. With load factors consistently high, yields are weakened, either on point-to-point traffic or as Chinese airlines aggressively discount connecting/transfer traffic.
On a volume basis, international traffic remains strong, expanding by an estimated 9.3 million passengers in 2016 for 22% growth. Chinese airlines continue to pivot to the international market, and Air China now has more capacity internationally than domestically.