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Guangzhou’s flagship carrier slashing fares, and Dragonair to change its name?

Posted: 03/21/2013 8:57 am

When it comes to the airline business, the gloves are off as Guangzhou muscles in on Hong Kong and Singapore’s party.  Here’s another round-up of all the musings in the airline world in the Pearl River Delta.

Cheap Canton
China Southern Airlines is throwing down the gauntlet to the old-guard with rock bottom fares as it attempts to make a name for itself flying between Europe and Australia.

According to Bloomberg, CSA is undercutting Qantas by as much as 34 per cent between Sydney and London. It is prepared to sacrifice profitability so it can take market share away from Dubai, Hong Kong and Singapore among others.

Here are the all-important numbers:

China Southern’s cheapest economy-class fare between Sydney and London for a two-week trip starting May 4 was A$1,442 (9,309 yuan, US$1497) on travel booking website webjet.com.au yesterday [March 13].

The lowest price for a non-Chinese airline, on Malaysian Airlines, was 19 per cent more expensive at A$1,721 (11,110 yuan, $1,786). Emirates tickets started at A$1,896 (12,240 yuan, $1968) while Singapore Air’s was at A$1,940 (12,524 yuan, $2,014).

The cheapest Qantas ticket was 51 per cent more than China Southern, at A$2,180 (14,074 yuan, $2,263).

Currently, all 30 weekly China Southern flights to Australia from Guangzhou are profitable, an incredible feat. However, a health check on the rest of the airline’s international network tells a different story. The majority are languishing in the red, along with its domestic operations.

These problems can be attributed to a lack of awareness to the CSA brand globally and serious competition in the mainland, but its image is changing as it further embeds itself into the SkyTeam airline alliance.

In announcing the Canton Route last year, it made a play on Cathay Pacific’s Hong Kong territory, but it also joined a handful of airlines connecting the dots, usually via the traditional Kangaroo route.

At the start of next month, Australia’s Qantas, which first coined the Kangaroo Route, will leave its Singapore stopover for Dubai in partnership with Emirates, leaving British Airways and Singapore Airlines a wide berth. But these carriers carry some of the highest fares, leaving state-backed CSA to undercut its rivals.

Bloomberg reports:

The [Canton] route will provide experience needed for further expansion into North America and Europe as annual spending by Chinese tourists exceeds $100 billion.

Here’s what the rivals have to say:

The Chinese carriers “are on our radar,” said Simon Hickey, head of Qantas’s international unit.

The competition “keeps us on our toes,” Singapore Air spokesman Nicholas Ionides.

Qantas and Singapore Air are configuring their own strategies for growth and profitablity

Peter Harbison of aviation analyst CAPA says:

“The sheer volumes of travelers mean that eventually China can be the most powerful transit country in the region, probably the world…They will be able to price very, very competitively.”

Plans to make Guangzhou a transit hub of choice are well underway, with upgrades to existing infrastructure and an expansion in full swing. Still, it has a ways to go before it can take on award-winning Changi Airport in Singapore, the premier choice.

BA to go A380 to Hong Kong
British Airways is joining the superjumbo pack later this year as it unleashes its first batch of 12 Airbus A380s to Hong Kong. The UK’s flagship carrier has penned November 15 for its first departure if all goes according to plan.

This will be a boost also to Cathay Pacific, as it joins up with BA to become the partner of choice to take passengers between Australia and Europe. Deploying the A380 will marginalise CSA’s attempts to shift passengers from Hong Kong to Guangzhou.

All change for Dragonair?
Rumours of a name change at Dragonair are being speculated, first reported by CAPA, as Cathay Pacific seeks to accelerate the makeover of the regional airline it bought back in 2006.

A rogue photo sent to the South China Morning Post has heightened speculation that change is afoot.

The name is Dragon… Cathay Dragon.

The hybrid puts a Swire stamp on its purchase, keeping part of the Dragonair brand – stated to be a powerful name among Asian travellers – and shoehorning Cathay, widely recognised around the world, to show who’s in charge.

The option to refresh the brand comes as naming rights expired last year leaving the door open to change.

Dragonair’s cabin offerings will soon be matched to its sister airline in all but colour, giving consistency to customers – a regular complaint among seasoned Cathay travellers shoved onto codeshare flights.

Dragonair image: SCMP / Other images: Danny Lee

Haohao

Airline revenue crashing due to high-speed rail competition in China

Posted: 02/20/2013 3:55 pm

China’s major airlines are spilling red ink everywhere.

The SCMP is reporting that mainland carriers have amassed RMB1 billion (US$160 million) in losses in the last three months, with pressure coming from China’s ever-expanding high-speed rail network.

Those suffering include Guangzhou-based China Southern Airlines, the biggest of the major domestic carriers, whose revenue per kilometer – a measurement of the available seats sold – fell 1 per cent year-on-year. By comparison, Air China shed 1.5 per cent and China Eastern slumped 2 per cent.

But those statistics don’t really tell the story of last year.

China Southern, which is ramping up capacity with the introduction of five Airbus A380s, is putting more resources into its long-haul operations. The newly appointed ‘Canton Route’ is part of the new international focus. At the same time, it is having to contend with soaring jet-fuel prices.

Here is a significant line from the general manager Tan Wangeng carried in CAPA revealing the extent of today’s problems:

All of the carrier’s 30 weekly services from Guangzhou to Australia and New Zealand are profitable, the result of the carrier’s strategic transformation into an international network carrier (Xinhua, 06-Feb-2013). According to Mr Tan, the majority of Chinese carrier’s international routes are making losses.

With high-speed rail supercharging national connectivity, it’s going some way to put downward pressure on airfares, placing it at odds with the state-backed carriers.

Here’s what MF Global’s greater China transport analyst Geoffrey Cheng told SCMP’s Charlotte So:

“The diversion to high-speed trains has become more and more serious as the memory of the high-speed-train tragedy in Wenzhou in 2011 fades out.”

The situation has been made worse by airlines boosting capacity in expectation of a brisk Chinese New Year. Now, rock-bottom prices are in the system to try and fill seats.

While lagging, aviation analysts CAPA say growth will more than make up for short-term sluggishness. They says airlines can absorb a 3 per cent capacity cut in 2013.

If the 3% drop in capacity is entirely correlated to HSR, the one-year drop would be made up for in coming years with higher growth.

With the Chinese government tightly controlling aircraft imports, demand generally exceeds supply, which would allow any excess capacity on a route to be re-deployed.

CAPA has also conducted more of a detailed analysis on the impact of high-speed rail in China.

HSR holds an advantage over air travel on sectors under 800km. Between 800-1200km there could be a tradeoff depending on factors including how direct the train tracks are and what the fare difference is. Above 1200km air travel will almost always hold an advantage.

Seems pretty straight forward.

China Southern’s biggest high-speed rail threats are from Guangzhou to Wuhan (1020 km) and Beijing (2170km).

Image: Danny Lee

Haohao

Diaoyu dispute forces Chinese airlines to cut service to Japan

Posted: 11/5/2012 11:00 am

China Southern Airlines is axing 22 Japanese flights and scaling back capacity on other routes in and out of the country during the winter months, a move largely seen as a result of reduced demand for flights to Japan amid the Diaoyu/Senkaku Islands dispute.

Airline Route is reporting services from Changchun, Dalian, Guangzhou, Harbin and Shenyang are being reduced, affecting flights to Fukuoka, Hiroshima, Nagoya, Niigata, Osaka Kansai, Sapporo, Sendai, Tokyo Narita and Toyama.

Dalian is the worst hit, losing 14 flights.

The Centre for Aviation (CAPA) revealed one-way seat capacity between China and Japan has fallen to its lowest level since 2004. Capacity for October was down 9 per cent year-on-year.

Other plans to boost capacity have also been shelved, affecting the second daily Guangzhou-Osaka Kansai service.

The 174-seat Airbus A321 will continue to serve the route, replacing the 374-seat Boeing 777-200 for the time being, representing a near 110% cut in seat availability. CSA has also removed 120 seats from its daily Guangzhou-Tokyo Narita service, replacing its Airbus A330-200 with a Boeing 737-800.

Airspace reform urged
The Comprehensive Transport Institute is calling for reform of China’s airspace and expanding its use for civilian aviation.

The group is warning congestion will come to a head once Guangzhou’s new runway opens, combined with a third runway being considered in Hong Kong.

China Daily carry this self-evident line describing the situation:

The region’s sky has been so severely congested that the International Air Transport Association has said that the situation in the Pearl River Delta is one of the top three global air traffic control problems.

With more flights connecting six PRD airports (Foshan, Guangzhou, Hong Kong, Macau, Shenzhen, Zhuhai) to the rest of Asia and the world, experts are questioning how much more the region can take with such little approved airspace available.

Passenger improvements for Baiyun Airport
Life of Guangzhou is reporting airport management at Baiyun Airport will invest RMB4 million into passenger improvements at Baiyun Airport.

Some ideas include a smartphone app for better on-the-move information in the hands of passengers.

Haohao
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