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Airlines to slug it out on home turf

By Wang Ying (China Daily)
Updated: 2009-07-22 08:05

The merger between China Eastern Airlines and Shanghai Airlines has brought to the fore the savage dogfight with Air China as they are trampling on each other's supposed home turfs.

As early as February, Air China, the national carrier, quietly promoted its Shanghai office to a full-fledged branch. Industry observers said the carrier may be planning to move at least a part of its international flights to Shanghai from Beijing.

Pilots walk around an Air China jet during a routine pre-flight equipment check at the Beijing Capital International Airport. Air China is in the process of moving part of its international flights from Beijing to Shanghai. [CFP]

A news report yesterday said Air China had started the process of eventually shifting 80 percent of its international flights to the Shanghai hub to take advantage of the expected increase in overseas visitors to the World Expo next May.

Though busy with the merger, China Eastern has not been keeping quiet. Earlier this month, the Shanghai-based carrier announced that it had upgraded its office in the capital to a branch that would operate its own aircraft fleet and maintain its own pilot team.

According to the carrier's plan, as many as four Airbus A330s would be under the control of the Beijing Branch, and the fleet size would expand to nine by the end of this year.

Liu Shaoyong, chairman of China Eastern, said the carrier would raise its Beijing market share from the current 13 percent to 20 percent within five years.

Rao Xinyu, board secretary with Air China, told reporters the carrier would maintain its Shanghai strategy despite the ongoing merger between China Eastern and Shanghai Airlines. Currently, Air China commands 12 percent of the Shanghai market share.

As China's two most important cities and airline hubs, Beijing and Shanghai attract much rivalry from domestic carriers, said Ji Lijun, an analyst with Shanghai Securities.

"Beijing is a traditional city servicing international flights, while Shanghai is an important hub for flights in China, Japan and Southeast Asian countries. All carriers know the two cities' significance," Ji added.

Si Xianmin, president of the Guangzhou-based China Southern Airlines, said the new China Eastern would definitely shake China Southern's footing in Shanghai, but may be less influential in other areas.

"Shanghai positions itself as a would-be global financial center and shipping hub, and that would bring about more passenger flight demand. It's wise to secure and expand the market share in Shanghai before it is too late," said an insider from China Southern, who refused to be named.

"China Southern will start focusing more on Shanghai market," he said.

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The insider said the current competition involves not only the top three State-owned carriers, but foreign carriers as well. In addition, budget carrier Spring Airlines has cultivated a large group of loyal clients through low-cost flights.

"If we factor in the rivalry of high-speed railways, the competition is even more complicated," he added.

"We will see the three major carriers speed up on their expansion plans in each others' headquarters. But what's important is to guarantee that they will hold market share in their home bases," an analyst said.

Zou Jianjun, a professor with Civil Aviation Management Institute of China, said the newly-merged China Eastern should be wary of its home base.

"Although China Eastern and Shanghai Airlines together hold more than 50 percent of Shanghai's market, they may not secure the percentage after the merger.

"This is because the previous market share was achieved through fierce competition. In addition, after the merger, they may shift part of their capacity to other cities. All these factors may turn negative," Zou warned.