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China Ease Rules On Popular Air Routes, Foreign Firms To Face New Competition


09/26/2018


China Ease Rules On Popular Air Routes, Foreign Firms To Face New Competition
China is set to relax its norms for Chinese carriers in aviation which will allow such companies to enter into 20 popular long-haul routes to China which are currently operated by foreign airlines. This will increase the competition in those routes. 
 
According to data from Chinese aviation data firm Variflight, the 20 routes account for about 20 percent of Chinese long-haul daily capacity.
 
The new regulations is expected to impact some U.S. and European airlines such as United Airlines and Air France KLM because their operational costs on these routes are high and have lower passenger demands from their home countries on those routes. Further, these airlines are also perceived to be less appealing for Chinese travellers because of cultural differences.
 
“The North American and European airlines are no match for the Chinese carriers,” said Corrine Png, chief executive of Singapore-based transport consultancy Crucial Perspective, and cited the data that Chinese customers accounting for the majority of traffic on t these routes.
 
There are some foreign carriers that have already exited Chinese routes such as American Airlines which has announced its plan to stop flying on the Shanghai-Chicago route following its cancellation of the Beijing-Chicago route and saying that the routes are a “colossal loss-maker” and costs the airline over $30 million a year.
 
China’s Civil Aviation Authority has said that it is changing the “one route, one airline” policy, initiated in 2009, because it felt there is increasing demand for the routes  in a fast changing aviation market in China.
 
There are two Chinese airlines already operating flights on two of the long haul routes - Shanghai-Paris and Shanghai-Frankfurt.
 
About half of the traffic on the 20 log distance routes that included the likes of Beijing-Los Angeles and Shanghai-London, are controlled by Chinese airlines, said Variflight’s chief data analyst, Cong Wei, and added that the share can be increased much further.
 
State-controlled carriers China Eastern Airlines Corp Ltd, China Southern Airlines Co and Air China Ltd share these routes. The foreign airlines that operate on these routes include Air France KLM, Lufthansa, Air Canada, British Airways, Virgin Atlantic, Air New Zealand, United Airlines, Delta Air Lines and American Airlines.
 
While Air France KLM is keenly watching the regulation change, a company spokesperson said that it had “very little influence on how this rule could evolve.”
 
“Competition between Europe and China is already present and increasing,” the spokesperson said. “We continue to enhance our existing partnerships to offer the most attractive products and services at competitive fares to all our customers. This is undoubtedly the best response to this eventuality.”
 
The partnership that Delta Air Lines has with China Eastern put it in a strong position in the routes, the company said, and added that the Chinese aviation market is still an important one for it.  The assessing new route opportunities are being constantly assessed by Air New Zealand, it said. No comments were available in the media from some of the other foreign airlines in China including Lufthansa, Air Canada, British Airways, Virgin Atlantic, United Airlines and American Airlines.
 
(Source:www.reuters.com)