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Chinese airlines struggle to cope with competition
Updated: 2005-06-08 22:12

Air China, China's largest airline,plans to invest 688 million yuan (around 83.19 million US dollars) to renovate the hardware of the first-class and business-class of 15 long-range aircraft before the end of next year.

The relevant service in these air planes, either Boeing 747-400or Airbus A340-300, will also be upgraded, said President of Air China Li Jiaxiang.

The move is widely regarded as part of the national-carrier's efforts to cope with the fierce competition of foreign airlines who are trying to grab a bigger share of the growing Chinese market.

Ten days after Spain's Air Europa launched direct Beijing-Madrid flight, a Boeing 777 passenger plane of the British Airways landed at the Shanghai Pudong International Airport in the morning of June 2, marking the official opening of the direct Shanghai- London air route.

The British Airways will operate weekly five direct flights between Shanghai and the Heathrow Airport in London.

Before 2004, British Airways operated only six direct flights to Beijing weekly.

On May 20, US-based Continental Airlines, the world's sixth largest airlines, announced that it would launch a daily non-stop air service from Beijing to New York starting on June 16. It will be the only carrier offering daily non-stop service between the two cities.

"We have full confidence in the air route," said Jim Compton, executive vice president of Continental Airlines.

"China's fast growing economy, its attraction to foreign capital, and its business opportunity to host Olympics and World Expo will enable aviation industry to rise quickly in the future," he said.

The Continental Airlines is the third US airlines to enter China's passenger transportation market, after the Northwest Airlines and the United Airlines, since China and the United States signed an aviation agreement in 2004.

"We are very pleased to offer world first-class service to the rapidly growing and flourishing Chinese market," said Compton, "we are also very proud to have been approved to launch the air route linking New York and Beijing, the world's two most important cities."

The airlines' return ticket from Beijing to New York is priced at only 5,288 yuan (639 US dollars), compared with 5,700 yuan ( around 689 dollars) offered by Air China. Besides, passengers can also get a reward of 21,100 mileage during the company's promotion period.

The offer, so attractive to customers, showed the determinationof the US airlines to win in the Chinese market, insiders here said.

Meanwhile, the United Airlines offered passengers Beijing-New York return ticket priced at 4,900 yuan (593 dollars) with a transfer, starting on May 5.

The Northwest Airlines joined the price war by selling Beijing-New York two-way ticket at 5,260 yuan (636 dollars) with two transfers within 30 days.

In addition, the US airlines are also trying to upgrade their air plane models served on the Beijing-New York air route. The Continental Airlines announced that 283-seat Boeing 777 planes, with 48 business and first-class seats, will operate on the Beijing-New York air route.

Compton said the opening of the Beijing-New York air route is only the airlines' first step toward entering China's aviation market. The US carrier also plans to launch direct Shanghai-New York air route in 2007 and the application has already been submitted to concerned departments.

The United Airlines, which already has 28 flights to Chinese inland cities each week, is also stepping up efforts to expand its market shares. It plans to further increase its flights to certain cities in the near future.

At the same time, Sri Lankan Airlines will also open direct Beijing-Colombo flights beginning on June 15. This will be the first Sri Lankan air route linking the two nations. The new route is expected to facilitate Chinese travelers to Sri Lanka and Maldives.

Chinese airlines, meanwhile, seem a bit humble and passive in facing the aggressiveness of their foreign counterparts.

So far, only state-owned Air China operates Beijing-New York flights. The airlines reported losses each year since launching the air route in 2002, a report of the Beijing-based China Economic Times has said.

That explains why other Chinese airlines, mainly including the Southern Airlines in Guangdong Province and Shanghai-based Eastern Airlines, hesitate to initiate air routes between China and the United States. Only the Hainan Airlines in south China's Hainan Province announced last year that it was ready to operate flights to the United States.

"This is related to China's overall national strength," said LiXiaojin, a researcher with the China Civil Aviation College, " Chinese airlines bear greater pressure compared with their foreign counterparts, as the fuel oil prices are higher at China's domestic market, and they also have to spend heavily on importing air planes. This put them in a disadvantage position in competing with foreign airlines."

Besides, domestic airlines are still less competitive than its foreign counterparts in terms of capacity and management efficiency, said Li.

At present, Chinese airlines usually adopt the "follow-up" policy on international routes, Li noted. "They will first see how the foreign airlines operate and then adjust their operation mechanism accordingly."

It takes time for Chinese airlines to catch up with their foreign counterparts and learn to compete with them, he said.

An earlier report said that by the end of 2004, 74 foreign airlines operate 1,091 flights to China each week and eight Chinese airlines operate weekly 994 flights to overseas destinations.

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