Cleared for take-off

China Eastern and China Southern to depart to new Beijing airport

AirChina w

Air China will get more slots at the existing Beijing Capital Airport

The Civil Aviation Administration of China (CAAC) admitted in May that average flight delays last year reached 21 minutes, two minutes more than the year before.

The bad news for passengers is that the situation looks likely to get worse as China’s aircraft fleet doubles over the next 20 years.

Air traffic control is the primary culprit for the congestion, although some of the country’s main airports are full to the brim too, which is why Beijing is building a second hub at Daxing, a plan we first mentioned in WiC180.

Early last month CAAC made another major announcement on the Beijing airport plan, confirming that China Eastern and China Southern Airlines will move to the capital’s new airport when it opens in two years. CAAC says it has agreed that both carriers can take four years to shift all of their Beijing-based domestic and international routes to the new facility, and that they will get favourable treatment in areas including international traffic rights, slot allocation and airport charges as they make the transition.

Hebei Airlines, Beijing Capital Airlines and China Postal Group are also going to move to Daxing, although Hainan Airlines is yet to find out if it will have to do the same.

Both of Beijing’s airports will be hubs and there is bound to be rivalry between them: the existing Capital International Airport is closer to central Beijing but Daxing is getting a high-speed rail link into the city and it should be able to draw on wider customer demand, including from the nearby municipality of Tianjin and populous Hebei province.

Once completed, Daxing will have the capacity to handle 45 million passengers a year, growing to 70 million passengers by 2025. But local analysts are suggesting that Air China is the more immediate winner from the split, as it will free up resources at the existing airport.

It already handles more than five million passengers beyond its intended 85 million capacity.

This congestion has slowed growth there to the point that Shanghai has overtaken Beijing in total air traffic, if numbers from its two airports in Pudong and inner city Hongqiao are combined.

Shanghai’s sorpasso has been supported by customers from the Yangtze river region arriving at its hubs by high-speed rail, and by the vogue for visits to hot spots like Japan and South Korea, which are best served from Pudong.

Air China looks set to deepen its dominance at its current Beijing hub, however, where it already accounts for almost half of passenger flow. In the short term China Eastern has most to lose from the move because of the potential disruption to its market share in traffic between Beijing and Shanghai, the most profitable domestic route. In the longer view, high-speed rail looks likely to bite deeper into air travel between China’s two leading cities. And China Eastern and China Southern will both get the chance to embed themselves at the new hub in a manner similar to Air China’s entrenched position at the current facility.

Planners have said that they expect the two airlines to account for about 40% of the new airport’s passenger traffic when it becomes fully operational.

The two will also be hoping that the shake-up is a chance to challenge Air China’s de facto dominance as the country’s flag carrier. Both have complained that Air China gets preferential treatment from the aviation authorities, with no open bidding for take-off and landing slots out of Beijing, unlike their own hubs in Guangzhou and Shanghai.

China Southern has also had difficulties getting permissions to operate its A380 fleet from various points in China, and blames political interference (see WiC168).

Away from the dogfight between the major airlines, the country’s low cost carriers will want more opportunity to fly from Daxing. In the past Spring Airlines was given very early departure times from Beijing, says Time Weekly, making it difficult to attract passengers. The airline gave up on flying out of the capital, choosing to operate from Shijiazhuang and Tianjin instead, and giving its customers a free ticket on the high-speed rail link into Beijing.

Now Spring may return to the capital, if it can secure better departure times and lower airport charges. Of course, low cost carriers typically operate from less sophisticated secondary airports, and Daxing won’t want to be considered as one of those. Additionally, expect the majors to protest if carriers like Spring get cheaper slots for the same level of service.

Bigger picture, though, Daxing may need to battle for business. Spring – the country’s leading discount carrier – has already said that it will allocate more aircraft to its Shenyang and Shijiazhuang bases, and that it plans to establish Chengdu, Kunming and Chongqing as domestic hubs for its services.

The rise of alternatives to the main airports is a market trend, believes China Business, pointing out that airspace congestion at the hubs is helping challenger locations to grow at a much faster pace.

In some cases that is because they are building from a much lower base, although some of the second tier airports are already processing 30 million passengers.

However, the surge in outbound travel is making direct flights to international destinations more viable and reducing some of the reliance on travelling through the first tier hubs. Passengers can now get to Cairo, London and Moscow direct from Chongqing, for instance, or fly straight to Amsterdam from Xiamen, or direct to Auckland from Chengdu.

Cities like Chengdu and Chongqing also look well positioned, because they offer shorter flight times to key destinations in Europe (see WiC211).

“By 2016 China will have 15 second-tier cities opening up long-haul, direct international flights”, Darren Hulst, an executive at Boeing, told China Business. “And of the 90 newly opened overseas routes over the past five years, 41 are connected to China’s second tier cities.”

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