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Airlines: Tourism fuels airlines lift

Carriers add more international destinations

 

Following a 3 percent decline a years ago, the airline category rose 5 percent in value, a modest rise driven by rising consumer wealth, steady travel increases, route expansion, and lower fuel costs.

 

Outbound tourism increased 5.1 percent to 62.0 million tourists visits during the first half of 2017, according to the China National Tourism Administration, which also reported a 2.4 percent increase in inbound tourism to 69.5 million trips. Domestic tourist trips rose 13.5 percent year-on-year for the first half of 2017.

 

The airlines also benefited from less competition from high-speed rail. Air transportation revenue increased 13 percent through the third quarter of 2017, according to the China Civil Aviation Transportation Authority.

 

China’s three state-owned airlines added direct flights to European destinations. Air China now connects Beijing and Athens with direct service. China Eastern Airlines launched direct flights between Xi’an and Prague. China Southern Airlines announced a direct link between Wuhan, capital of Hubei province, and London.

 

The state-owned airlines have code share agreements with international carriers. American Airlines recently invested $200 million and entered a code sharing agreement China Southern Airlines. Delta invested in China Southern several years ago. United and Air China have a code sharing arrangement. In addition, the airlines attempted to control more of the brand experience by increasing direct sales, often through their own apps.

 

Hainan Airlines, which is not state-owned, added a direct flight to Brussels from Shanghai. It already flies directly from Beijing. Hainan Airlines also introduced daily flights connecting the southern China cities of Chengdu, capital of Sichuan province, and Chongqing to New York City, which became the ninth North American destination served by Hainan Airlines. Owned by HNA Group, Hainan Airlines also flies to Los Angeles, Las Vegas, Seattle, San Jose, Chicago, Boston, Toronto, and Calgary.

 

Air travel growth will increase demand for aircraft, and the Chinese government is determined to have Chinese-made jets compete with overseas manufacturers, as part of the Chinese government’s policy to replace certain products made overseas by those produced by Chinese companies. China introduced its C919 passenger jet prototype, but deliveries are not expected for several years. Purchases from China’s three state-owned airlines are expected to drive the rollout of the C919. Government plans to add airports, particularly in inland China, should also drive industry growth.