Airlines: Pricing reform expected to enhance profitability
Passenger and cargo volume increases
The airlines category increased 7 percent in value, following a 5 percent increase a year ago. With the addition of Shenzhen Airlines, the BrandZ™ China Top 100 now includes five airline brands. The newcomer joins Hainan Airlines, a market-driven firm, and three State Owned Enterprises: Air China, China Eastern Airlines, and China Southern Airlines.
Reforms enabling airlines to set prices on most domestic routes drove airline stock prices higher and were expected to enhance profitability, which had been hurt by rising fuel costs and a weaker yuan. Because it serves the most domestic routes, China Southern Airlines, in particular, is expected to benefit from the reforms, announced by Civil Aviation Administration of China (CAAC).
Both passenger traffic and cargo volume increased through the first nine months of 2018, although cargo grew at a slower rate. Passenger travel increased 7.9 percent on domestic routes and 10.5 percent on international routes, according to the CAAC. Cargo and mail volume increased 2.3 percent
China continued to be the world’s fastest-growing aviation market, a trend is expected to continue. When Daxing International Airport opens outside of Beijing, in late 2019, it will be the largest airport in the world, and part of the Chinese government’s investment in infrastructure to support the growth of tourism and trade.
As members of airline alliances, the Chinese airlines integrate with other global carriers. Air China and Shenzhen Airlines are part of Star Alliance. China Eastern Airlines is part of SkyTeam, which had also included China Southern Airlines until the carrier left the alliance early in 2019.
Air China served 189 cities in 42 countries and regions. It implemented brand promotion campaigns in China and Europe and entered marketing agreements with several national tourist boards. It also implemented several self-service initiatives to improve customer service. Air China holds a major interest in Shenzhen Airlines, which operates both passenger and cargo businesses. Shenzhen inaugurated its first route from Shenzhen, in southern China, to London.
China Southern Airlines focused on developing routes from Guangzhou to Asia-Pacific destinations. The carrier, which has a growing partnership with American Airlines, flies to 224 destinations in 40 countries and regions. China Eastern Airlines entered special cooperative agreements with Delta, Qantas, and Japan Airlines. The airline worked to improve customer experience by increasing self-service and mobile check in.
Even as Hainan Airlines continued to expand its international routes and become more independent from HNA Group, the restructuring of its corporate parent affected the airlines brand value.