China's Big Airlines Expand on International Routes

HONG KONG—China's big airlines are racing to boost their international reach as an increasingly congested home market weighs on earnings.

The nation's three state-owned carriers, which together account for nearly 80% of China's commercial airline traffic, have expanded internationally in the past few years as more Chinese citizens have traveled abroad. Much of the focus was on connecting Chinese hubs, such as Beijing and Shanghai, with big international destinations. And the expansion has been slow and uneven.

In recent months, though, the pace of international growth has accelerated. International traffic at Air China Ltd., China Southern Airlines Co. and China Eastern Airlines Corp. jumped 18% to 23% last month from a year earlier, outpacing mid-single-digit growth in domestic traffic.

And the focus overseas is shifting. Airlines are linking Chinese hubs with more second-tier international gateways, and connecting more second-tier Chinese cities with international hubs. Carriers also are targeting more customers for connecting flights. China Southern is increasing flights to Europe and Australia to move travelers between the two continents.

Chinese airlines are launching 23 new international routes in the winter schedule that took effect Sunday, according to the nation's aviation regulator.

The new routes include flights from Beijing to Houston, Geneva and Honolulu, as well as between Chengdu and Frankfurt, Nanjing and Sydney and Guangzhou and Moscow.

New, more-efficient long-range jets are helping make more routes commercially viable. And the new routes come as the carriers are increasing flights on their main international routes.

Yet analysts expect that it will take some time to develop consistent consumer demand, even though China's airlines generally have improved their service to tap Chinese business travelers.

"We've seen a very strong growth in outbound travel demand during the summer travel season. Stronger outbound traffic partially offset slower domestic traffic growth," said Davin Wu, an analyst at Credit Suisse. 

The international push underscores the pressure that China's airlines face in their core domestic business, with intense competition pushing ticket prices lower. And expanded coverage by China's high-speed rail system is diverting some customers away from the airlines.

Weaker earnings from two Chinese state airlines highlights the challenges they are facing despite a 10% rise in domestic airline traffic this year. Air China on Tuesday said its third-quarter net fell 7.3% to 2.94 billion yuan (US$483 million) from 3.17 billion yuan a year earlier, as increased competition weighed on airfares.

China Eastern, the smallest of the big three airlines, said net for January through September was 3.62 billion yuan, down 0.2% from a year earlier. Nonetheless, the carrier's third-quarter net rose 8.5% to 2.86 billion yuan.

The nation's air-travel market is booming despite slower economic growth and a frugality campaign by Chinese President Xi Jinping that has weighed on sales of first- and business-class tickets.

The pressure on airline earnings also comes amid moves by the government to liberalize the domestic airline market and promote the development of the nation's budget airlines. Beijing in May lifted a six-year ban on creating new independent airlines, approving two new privately owned carriers and signaling a looser grip on the industry.

Source: Wall Street Journal by Joanne Chiu

from China Travel & Tourism News http://www.chinatraveltourismnews.com/

Put the internet to work for you.

via Personal Recipe 701383