Unforeseen:Air China, China Eastern Airlines Both Obtained Dual Airport Operation Rights

The Civil Aviation Administration recently issued a document agreeing that China Eastern Airlines will keep the Beijing-Shanghai route at the Capital Airport and reduce its time slots ratio at Daxing Airport by 10%. Correspondingly, AVIC Group (Air China parent company) was approved to enter Daxing Airport and use the time slots vacated by the Eastern Airlines Group.

This means that both Air China and China Eastern Airlines have been able to operate at the Capital Airport and Daxing Airport at the same time, reversing the earlier statement made by the Civil Aviation Administration that “the domestic aviation division is not allowed to operate at both airports concurrently”, which is unexpected. According to informed sources, the document was sent to the local administration by the Civil Aviation Administration headquarters and then verbally notified to the two airlines.

“This program looks more like a negotiation between Air China and China Eastern Airlines. The Civil Aviation Authority is in a ‘passive’ role.” Many industry insiders pointed out that the changes in this program are perspectives on the country, the East and the South. The game between the large aviation enterprises and the civil aviation regulatory authorities is fierce.

Known as the “Civil Aviation Century Project”, Daxing Airport is scheduled to be officially launched at the end of September this year, with a total investment of about 80 billion yuan. It is one of the largest airports in the world. According to official forecasts, the annual passenger throughput of Daxing Airport will exceed 100 million by 2040.

Behind the billion-level throughput target is a huge new aviation market that is very attractive to the airline. Before the Daxing Airport allocation plan was released, the airlines began to plan for a response. However, for the overall relocation of Daxing Airport or two simultaneous operations, the airlines have “abacus”: the Beijing market has always been dominated by Air China, and Daxing Airport has become an expansion opportunity for China Eastern Airlines and China Southern Airlines; however, compared with the Capital Airport, Daxing Airport Distance The urban area is far away, and the disadvantages are obvious for the routes of business customers such as the Beijing-Shanghai route.

In July 2016, the State Council approved the Daxing Airport Airline Base Construction Plan, which stipulated that airlines should be divided into new and old airports according to their subordinate alliances. Among them, members of the Star Alliance, such as AVIC Group (Air China Parent Company), stayed at the Capital Airport, and members of SkyTeam, such as China Eastern Airlines Group and China Southern Airlines Group, relocated to Beijing New Airport. Although China Southern Airlines has since announced its withdrawal from SkyTeam, it does not affect the above allocation.

Many industry professionals pointed out that this kind of base distribution plan is the most reasonable one in the current technical means, and at the same time, it has actually avoided more interest entanglement through the “one size fits all” approach. “There is cooperation in code sharing and transit between alliances. From the passenger’s point of view, it is more convenient to travel to passengers in an alliance manner,” said Yu Zhanfu, global partner and vice president of Greater China at Roland Berger.

By the beginning of 2019, the Civil Aviation Authority reinforces this statement. On January 3, the Civil Aviation Administration issued the “Transition and Operation of Beijing Daxing International Airport and the “One City Two Airports” Flight Time Resource Allocation Scheme”, clearly emphasizing that other domestic airlines may not operate at both airports except postal aviation. The two airports operate simultaneously; foreign airlines, Hong Kong, Macao and Taiwan airlines can choose to operate between one or two airports. At the same time, the transition plan will also adjust the relocation period of China Eastern Airlines and China Southern Airlines from the original four-year transition period to five seasons.

“This is a clear indication that the three major airlines can no longer bargain.” The industry generally believed. According to the reporter, after the above-mentioned base distribution plan was released, the three major airlines arranged for the response. Both China Eastern Airlines and China Southern Airlines planned to keep one of their subsidiaries behind the Capital Airport. Air China also intends to intervene in Daxing Airport and is unwilling to let the market share in Beijing.

After the introduction of the transition plan, the industry once thought that the distribution pattern of Daxing Airport Airlines had been fixed. However, the new notice issued by the Civil Aviation Administration recently showed an unexpected “reversal.”

In this new notice, Air China was approved to enter Daxing Airport and received 10% of the time. Previously, Air China once had a lot of competition for the competition between Daxing Airport and the Capital Airport, and had publicly questioned whether Daxing Airport could achieve the expected scale.

The emergence of Xiong‘an New District is considered by the industry to be an important factor affecting Air China’s transformation. In addition, in order to ensure that Daxing Airport can achieve the expected throughput after it is put into operation, the Civil Aviation Administration has also issued a series of resource allocation policies that are inclined to Daxing Airport, such as introducing a competition mechanism on the long-haul route and breaking the original “one carrier per longhaul route ”. The system has affected Air China’s previous absolute competitive advantage on international routes.

China Eastern Airlines has been able to preserve its advantages on the Beijing-Shanghai route. The Beijing-Shanghai route is known as the domestic “golden route” and is the most abundant domestic route of the company. China Eastern Airlines has a market share of nearly 50% on this route. A brokerage analyst told reporter that through the calculation, the Beijing-Shanghai route in 2018 contributed a gross profit of about 890 million yuan to China Eastern Airlines.

According to this new plan, China Eastern Airlines avoided the loss of the Beijing-Shanghai route due to the relocation to Daxing Airport, and Air China also obtained a “pot” at Daxing Airport, which seems to be a two-pronged plan. “Actually, this plan is not conducive to China Eastern Airlines.” A person close to China Eastern Airlines pointed out.

The person told Caixin reporter that there are currently 23 flights on the Eastern Airlines Beijing-Shanghai route, with a fixed time of 46, and the amount of Daxing Airport is increasing dynamically. According to the short-term plan of the Civil Aviation Administration, by 2021, the number of time slots at Daxing Airport will reach 1,050, corresponding to a passenger throughput of 45 million. In the long-term plan, Daxing Airport will achieve a passenger throughput of 72 million in 2025 and 100 million in 2040.

“In the short term, the plan will help China Eastern Airlines avoid the loss of the Beijing-Shanghai route, but with the development of Daxing Airport, the 10% lost time of China Eastern Airlines will become a major loss,” said the person close to China Eastern Airlines.

On the other hand, from the overall planning of Daxing Airport, the change of the base allocation plan means that the CAAC’s previous policies for Daxing Airport may need to be adjusted. Among them, the most important concern of the market is that after Air China and China Eastern Airlines will realize the two dual airport operations, whether China Southern Airlines will respond and propose its own two-hub operating plans. “This is equivalent to opening a new hole.” Industry insiders pointed out.

Albert Aviation

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