Aviation Growth In China

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Aviation Growth In China

#1

Postby gear up » Wed Apr 12, 2017 8:26 am

Chinese carriers, formidable and unstoppable, could become an even bigger threat to other airlines than the Middle Eastern airlines, say aviation experts.

Singapore Airlines (SIA) and other Asian carriers should prepare themselves for fierce competition from these carriers, they warn.

Last month, American Airlines struck a US$200 million (S$281 million) deal for a 2.7 per cent stake in Guangzhou-based China Southern Airlines to get a foot in China's rapidly expanding air travel market.

China is expected to overtake the United States to become the world's largest aviation market by passenger traffic in the next decade.

The International Air Transport Association (Iata) forecasts that the number of people flying to, from and within China will almost double from 487 million annually in 2015 to 927 million by 2025, and hit 1.3 billion by 2035.

In comparison, US passenger traffic is expected to increase at a slower pace, to 904 million by 2025.

GROWTH OF CHINESE CARRIERS

To cater to the growing demand for air travel in the country, Chinese carriers - there are more than 40, of which about 15 operate international routes - are expanding rapidly, at the expense of their rivals.

Hong Kong-based Cathay Pacific, which relies heavily on mainland China traffic, is already a casualty of the onslaught.

Last month, Cathay reported its first full-year loss since the 2008 global financial crisis. Last year, the airline posted a net loss of HK$575 million (S$104 million) versus a profit of HK$6 billion a year ago.

Between them, the three mega state-owned Chinese carriers - China Southern, China Eastern and Air China - operate a fleet of about 1,400 aircraft. SIA has about 100.

Private carriers, like Hainan Airlines and Spring Airlines, are also growing rapidly. Hainan Airlines, which in based in Beijing, has about 170 aircraft while Shanghai-based Spring Airlines operates a fleet of about 60 planes.

Traditionally focused on the intra-China market, Chinese carriers are spreading their wings internationally.

Mr Abbas Ismail, course manager for the diploma in aviation management and services at Temasek Polytechnic, said: "The larger network carriers are direct competitors to SIA because they are all fighting for the same piece of the pie - ex-China to the US, Australia and Europe. While they are more of a direct threat to Cathay Pacific and Cathay Dragon, the rise of these carriers will affect SIA's transit traffic."

SIA operates a good business, bringing China travellers to Singapore, and from here to other points across its network, including cities in Australia, other South-east Asian points, New Zealand and Europe.

But Chinese carriers have, in recent years, been growing direct links to these cities.

International air capacity from mainland China has risen from around 33 million available seats in 2006 to about 76 million last year - a growth of more than 100 per cent, notes aviation analyst Shukor Yusof of Endau Analytics.

"And it continues to grow. I expect to see more point-to-point international flights, non-stop in the next few years from the three major airlines. China Eastern will set the tone because it is based in Shanghai, the city that is a magnet for many foreign visitors," he said.

Chinese airlines have also boosted their presence in the Singapore-China sector, though Singapore carriers still have the majority share of the market, for now.

There are currently eight Chinese carriers offering 145 weekly services between the two countries, compared with 112 in 2015.

On this side, five Singapore carriers - SIA, SilkAir, Scoot, Tigerair and Jetstar Asia - operate a total of 180 flights a week.

CHANGING PERCEPTION

There was a time when few foreigners would fly Chinese carriers as they were seen to be unsafe and unreliable, with poor service levels. This thinking is slowly changing.

"With the Chinese carriers buying many new aircraft - including the Airbus 380 and 350, as well as Boeing 787s - and better training for crew, we are seeing a change in the perception," said Mr Abbas.

Associate Professor Terence Fan, transport specialist from the Singapore Management University, said: "Chinese carriers have come a long way from the old days... Apart from improving safety levels, they have also been investing in new planes and top-notch seat comfort."

The quality of in-flight entertainment and service levels still have some way to go but "a flat bed - at a fraction of the cost that other carriers charge - still beats economy seats hands down", he said.

A study he did last year on travel trends showed that a return Singapore-Shanghai business class seat on China Eastern cost about the same as an SIA economy ticket.

The low fares are attracting a growing number of price-sensitive travellers, he said.

To improve traveller perception, Chinese carriers are also starting to hire foreign pilots and crew.

SIA, for example, has lost several captains to Hainan Airlines which pays them more than double what they used to earn.

Mr Shukor said: "The major Chinese airlines were under many observers' radar because, unlike the Gulf carriers, they don't talk much. They were busy building up their fleets and network. And now, Chinese airlines offer one of the most lucrative packages to pilots."

In retrospect, it is a shame SIA failed to invest in China Eastern some years ago, he added.

In 2008, SIA and Temasek Holdings made a joint HK$7.2 billion offer for a 24 per cent stake in China Eastern, but the bid was turned down by the Chinese carrier's shareholders.

"The options (of investing in China) are lesser now and, invariably, more expensive," Mr Shukor said.

SIA must not allow the Chinese carriers to catch up, he said. "It must play to its strengths, which include its location at a major hub and influence in the marketplace, and constantly innovate and maintain its appeal with top products and services," Mr Shukor said.

SIA is, in fact, working closely with subsidiaries SilkAir, Scoot and Tigerair to grow connecting traffic through Singapore, and also plans to launch new seats and other cabin products later this year.
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Re: Aviation Growth In China

#2

Postby Moertoe Pilut » Wed Apr 12, 2017 8:20 pm

Chinese carriers are also offering better job packages. I'm thinking going that route, 3 weeks on, 2 weeks off for around $12,000 per month :thumbs:

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Re: Aviation Growth In China

#3

Postby Bell 407 » Thu Apr 13, 2017 7:11 am

Moertoe Pilut wrote:I'm thinking going that route, 3 weeks on, 2 weeks off for around $12,000 per month :thumbs:

Is that a serious consideration you are making Moertoe?


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