Dalian Airport

Dalian Airport expects continued growth as Air China and China Southern boost North East focus

Dalian Airport, China’s 15th busiest airport, is expecting continued growth in the coming years as it capitalises on its location as a regional financial base and gateway to a heavily industrialised city and an important international shipping centre and logistics hub in North East China. The airport, which reported a 12% year-on-year increase in passenger numbers to 12.0 million in 2011, is China’s ninth largest airport by international capacity and the biggest in the northeast region by passengers numbers. (It is the region's only airport handling more than 10 million passengers p/a. Other key airports in the region include Harbin, Changchun and Shenyang.)

Air China subsidiary Dalian Airlines covers a key strategic position in northeast China

Air China start-up Dalian Airlines commenced operations on 31-Dec-2011, marking another milestone in the flag carrier's expansion of its domestic footprint. A bastion of China Southern (following its takeover of China Northern in 2003), Dalian Airport is a key northern gateway, with strong trade links to neighbouring Japan and Korea - which feature in Dalian Airlines' future expansion plans. The focus on the north-eastern region also reflects a shift in domestic network development patterns in China in light of increasing competition from the high-speed rail (HSR) network. Shandong Airlines, Hainan Airlines and China Southern Airlines have separately stated they will increase services to/from China’s north-east and north-west regions.

With the establishment of Dalian Airlines, Air China, is expanding its domestic and regional presence through a subsidiary operation. The complex ownership structure of subsidiaries is common among the ‘Big Three’ carriers in China, while HNA Group also has a convoluted subsidiary and ownership structure, in addition to a branch carrier network.

Air China receives approval to establish Dalian Airlines; airport expansion approved

Air China received preliminary approval from CAAC Northeast Regional Administration to establish Dalian Airlines Co Ltd in conjunction with Dalian Baoshui Zhentong Co on 05-Jul-0211. The carrier will be based at Dalian Airport, the nation’s 16th largest airport and the busiest in north-eastern China.

CAAC to continue implementing stringent measures for new entrants; a few startups emerge for 2011

The CAAC this quarter confirmed it would continue the suspension on accepting new airline applications, including the establishment of subsidiary airlines, in a bid to ease competitive pressures and improve air transport safety requirements. The CAAC will also stop receiving applications for airlines to establish branch companies, and increase the threshold on airlines wishing to establish subsidiaries and branch companies.

Consolidation and high-speed rail squeezing out China’s second-tier carriers?

China’s second-tier carriers are hard at work at present, rapidly expanding their domestic and (in some cases) international route networks. However, the vast majority of these airlines are now doing so under the control of the "Big Three" carriers and/or HNA Group, as consolidation accelerates in China. As such, China’s airline evolution is at a very interesting stage. Where previously the major airlines: 1) established considerable branch carrier networks to serve diverse geographic areas in China; and 2) eliminated brands of the acquired airlines, they now appear to be looking more strategically at segmenting the market, retaining the second-tier carrier brands, particularly those focused on tourism/leisure markets.