(WSJ) Chinese airlines are capitalizing on the wanderlust of China's rising middle class by expanding their long-haul routes, and at a pace that is fast upending the hierarchy of global aviation.
Since September, Chinese carriers have added seven direct flights to North America—including routes from second-tier cities less known abroad including Zhengzhou, Qingdao and Xiamen. By comparison, U.S. carriers launched just two China routes in all of 2016.
Sichuan Airlines opened a new direct route between Los Angeles the northern Chinese city of Jinan on Tuesday. It is the third nonstop U.S. flight the airline has started operating since October. Hainan Airlines, China's biggest privately owned carrier, by itself launched 13 new long-range routes this year, including a new Beijing-Las Vegas flight initiated last week.
The result is that trans-Pacific travel, where American carriers were once the most conspicuous, is becoming an increasingly Chinese affair.
"Chinese airlines are going to be as dominant, if not more dominant, than the big three U.S. carriers within the next decade," said John Grant, a UK-based aviation industry consultant.
Mr. Grant characterized the situation as a "land grab," with China's airlines scrambling to secure new routes—even commercially shaky ones—in the hope they will become viable in the future.
Last year, for the first time, Chinese airlines overtook their American counterparts in the number of scheduled U.S.-China flights. Now the gap is widening: Chinese airlines are scheduled to operate 781 China-U. S. flights this month, compared with 596 by U.S. carriers, according to aviation data firm OAG.
Several factors are driving the trend, starting with the growing Chinese appetite for travel. Last year 120 million Chinese tourists journeyed abroad, four times the number that ventured overseas a decade earlier, according to Chinese government figures. Over the same period Chinese visitors to the U.S. grew 10-fold to 2.6 million.
Having first tested the waters with regional vacations, many Chinese are now taking trips to North America, Europe and Australia that few could afford until recently. By 2020, over 200 million Chinese will travel overseas each year, brokerage firm CLSA forecasts.
China's airlines are perfectly positioned to take advantage of the travel surge, Mr. Grant noted. Chinese travelers prefer to fly with familiar brands, he said, and China offers subsidies to encourage its airlines to open routes without obvious commercial appeal.
Dandan Zou, who comes from Chengdu but now lives in Maryland, said new direct flights are making visits home much easier—and more comfortable—for Chinese expatriates.
"Chinese airlines have better food, better service and most of the time, cheaper tickets," said Ms. Zou, who is 27. "If there are both Chinese and American flights on the same routes, I will definitely choose the Chinese ones."
The government also divvies up new international routes so its airlines don't have to compete head-on as they launch new flights.
While low fuel prices and newly acquired fleets of fuel-efficient jets make it even cheaper for Chinese airlines to fly long-haul, turning a profit on these unproven routes might still take years.
In November, Sichuan Airlines started flying between Vancouver and Zhengzhou, a city about 400 miles south of Beijing. The route might take 10 years to become profitable without factoring in subsidies, a spokesperson for the subsidiary of China Southern acknowledged.
No matter—Chinese airlines care more about "strategic positioning and long-term prospects" than about near-term viability, the spokesperson said.
That means Chinese airlines are willing to accept more empty seats than their foreign rivals. China's big three state carriers have filled about 80% of seats on long-haul flights this year, company disclosures show, while their U.S. rivals cross the Pacific at about 85% capacity.
Deals abound: round-trip flights from Changsha to Los Angeles, or from Zhengzhou to Vancouver, start at around $570.
"The biggest difference is mind-set," said Will Horton, senior analyst at the CAPA-Center for Aviation, a provider of aviation market intelligence. "Chinese airlines understand how quickly their market expands, and they have a much longer leash to take risk and make investments."
United Airlines is one of only a few foreign carriers still trying to compete in Chinese markets beyond the key hubs of Beijing and Shanghai. It now offers 12 U.S.-China routes, having opened two nonstop routes this year from San Francisco to Hangzhou and Xi'an. It also flies direct to Chengdu.
"United sees huge business potential in these non-tier-one markets," said Walter Dias, United's managing director for China and Korea sales.
American Airlines, meanwhile, will launch a nonstop Beijing-Los Angeles flight next year—ending Air China's monopoly on the lucrative route.
But Chinese airlines aren't sitting back. Hainan Airlines will soon operate 10 U.S.-China routes, having received approval to connect Chengdu with New York and Los Angeles next year. The big three state-run airlines—Air China, China Eastern and China Southern—are also rapidly expanding.
In August, Air China topped United for the first time as the airline providing the most monthly China-U. S. flights, operating 295 to United's 293, according to OAG.
At some point "the music will stop," and Chinese airlines won't be able to keep expanding indefinitely without delivering profits, Mr. Horton said. But as Chinese society grows more affluent, he said, routes that sound implausible today could be eventual money-spinners.
Source: Wall Street Journal by Trefor Moss from China Travel & Tourism News http://ift.tt/1iB6EFm
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