China Eastern Airlines
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- 2550 Hongqiao Road, Hongqiao International Airport
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- Shanghai Pudong Airport
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- Part of China Eastern Air Holding Company
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Shanghai-based China Eastern Airlines is one of China's 'big three' state-owned airlines, with hubs at Shanghai's Pudong and Hongqiao airports, as well as Kunming Airport in southwest China. The airline operates a fleet of Airbus, Boeing, Embraer and Bombardier aircraft to support an extensive network, serving over 350 domestic routes and 40 international destinations, including cities in Australia, Europe, Korea, Japan, North America and Southeast Asia. China Eastern merged with Shanghai Airlines in 2010 and joined China Southern in the SkyTeam Alliance in Jun-2011.
Location of China Eastern Airlines main hub (Shanghai Pudong Airport)
China Eastern Airlines share price
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Jetstar Japan and Peach Aviation have received air traffic rights for China which, if utilised, would grow the Japanese LCC footprint in China – Japan's largest visitor source market. Spring Japan became the first Japanese LCC to serve China in Feb-2016. The absence of Japanese LCCs in China may seem surprising, but there are regulatory hurdles, market access questions and conservatism at Japanese LCCs. AirAsia Japan, launching in 2017, will likely leverage the group's China experience; it is the largest non-greater China airline group serving China.
The prospect of further growth comes as incumbents cite overcapacity. What was once a profitable market now only produces returns in the peaks. All Nippon Airways, the largest airline between Japan and China, reported lower revenue on the back of "a deterioration in the supply-demand environment". Spring China has told Bloomberg that some competitors "aren't well-prepared", and will be "phased out". Overall Japanese LCC routes and capacity may be small but will be watched by Chinese airlines, ever mindful of the need to find new business models.
Growth in Chinese aviation is now well evident in the number of Chinese operators of widebody aircraft. In early 2012 only five Chinese airlines operated widebody aircraft. The Jun-2016 delivery of an A330 to Tibet Airlines increased the number of widebody operators to 10, and by the end of the decade there will be – if all plans are followed through – at least 17 Chinese airlines operating widebody aircraft. This potentially sets up the market for more widebody and long haul airlines within China than in the rest of Northeast and Southeast Asia.
At the Farnborough Airshow Donghai Airlines and Ruili Airlines sought to acquire 787-9s, while Lucky Air will also take 787-9s and become China's first long haul LCC. Shenzhen Airlines will take A330s, while Juneyao, Okay Airways and Shandong Airlines are also considering the type.
There are also possible new entrants like Qingdao Airlines, whose shareholder Nanshan Group now owns Virgin Australia. Widebodies at Donghai, Ruili, Juneyao or others would mean a widebody operation from an airline not affiliated with one of China's four airline groups: Air China, China Eastern, China Southern and Hainan Airlines. The smallest of these, Hainan Airlines, operates more widebodies than all the secondary and tertiary airlines combined.
Lucky Air to be China's first long haul LCC, to Europe/N America in 2016; China international up 29%
There are debates about impacts from China's "new normal" of slower growth. Yet from an aviation perspective, it so far remains evident that aviation is not as impacted – despite the typical correlation between traffic growth and GDP. Chinese traffic is heavily leisure-oriented; China's middle class is growing; thirst for international travel is expanding; visa liberalisation continues to improve and foreign countries (and their airports) are embracing of Chinese visitors. All these factors make travel easier, and the Chinese government is encouraging – sometimes by force – for its airlines to "go out".
The first four months of 2016 experienced a smaller growth rate of 29% compared with 4M2015's 40% increase, but the net addition of passengers in 2016 so far is larger than in 2015. The international market is becoming more crowded with new operators.
The latest will be Lucky Air – the Kunming-based LCC division of the HNA Group and U-FLY Alliance. Lucky intends to deploy 787-9s to Europe and North America by the end of 2016.
Airline groups are now common, if not ubiquitous in Asia today. Their evolution, still often at experimental stage, involves addressing issues like multiple brand management, connectivity, coordination and associated issues. They are not easy to manage, but appear to be generating some success as established full service airlines adapt to new marketplace conditions.
Part 1 of this analysis of northeast Asian airline groups, with their "houses of brands", covered Mainland China and Hong Kong.
Part 2 reviews the courses being followed by airlines in Taiwan, Japan and Korea. Each of these markets has its own characteristics, influenced by domestic features, by government peculiarities - notably in Japan - and by the beliefs of the airline managements themselves.
Most Asian full service airlines have responded to LCC competition by establishing groups, in some ways similar to Europe's, but usually with greater differentiation in role and establishment. As a result they have for some time been houses of brands. There was typically limited consolidation in these sprawling mansions; there was also little coordination between the airlines in the group. This has led to redundancy, missed opportunities and confusing marketing. But the Asian market is dynamic, competitive pressures are increasing and constant adaptation is necessary. With experience now of these conditions more strategic thinking is emerging, along with the management resolve to shed complacency.
Brand consolidation is still some time off. Taiwan’s EVA Air and China Airlines are mulling consolidation with their respective regional arms UNI Air and Mandarin Airlines. But on the whole, the number of brands in Asia is growing, especially in mainland China. The initial changes at Asian airline groups include better coordination of group airlines.
China, along with instability in the Middle East and the latest health concern, have become catch-all excuses for those looking to describe the challenges faced by aviation. Concerns elsewhere may be legitimate and, in the case of Brazilian economic weakness, showing serious impacts.
Yet China’s aviation outlook is more than just bright; it is arguably the strongest it has been in its history. Chinese aviation is heading for an upturn over the next few years as part of its 'golden era' of development, forecast to run for perhaps 10-15 years.
International operations are producing growth and change on a profound scale, from the sheer size of the market to impacts on partnerships and global alliances. The domestic market continues to be delineated by the State-owned and private airlines. A rush of start-ups is under way, some of them better models than others. The shift to low cost output continues apace.