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Air China Looks To Domestic Growth for Pick-Up After Modest Third Quarter
Air China released its 2021 third quarter earnings Wednesday, revealing 7% growth in capacity — measured in available seat kilometers (ASK) — versus the same period In 2020, remarkably lower than the 26% growth recorded in previous quarters of 2021. The decelerated pace was anticipated as China has endured multiple rounds of upticks in Covid-19 cases during the summer, the traditional peak travel season, which caused the airline’s moderate performance over the quarter.
Air China received a total of seven jets in the past quarter, including four Airbus A320neos, two A321neos and one COMAC ARJ21. Only a fraction of the airline’s delivery plan for the second half of the year was realized. The Chinese flag carrier stated in its mid-year financial report that it will receive 32 new jets in the second half of 2021 — which came on the heels of 23 deliveries during 1H 2021 — meaning the airline will have to see a substantial increase in deliveries in the current quarter if it hopes to meet that goal.
Amid the challenging performance, the airline is still devoted to expanding its network within China, wishing to soon emerge from the crisis and build a solid foundation for future growth.
As international travel in China is still limited, Air China is putting its hopes on China’s domestic market. Wide-body aircraft, such as the Boeing 777 and Airbus A350 XWB, are being put to use on routes in-and-out of second-tier cities throughout Chins, such as Changsha, China, Kunming, China, and Harbin, all of which have seldom seen regular service using wide-body aircraft operated by an airline that does not base in the city.
In addition to more frequent domestic wide-body aircraft services, the airline is now looking for new points of growth within its home country, and, besides continuing to invest in its Beijing headquarters and other strategic first-tier city hubs such as Shanghai and Chengdu, China, Air China is going to battle with its competitors in China’s southern province of Guangdong and western province of Xinjiang, both of which are strategic hubs of China Southern Airlines, a long-term competitor of the Air China.
Five Airbus A320s were transferred from Air China’s Chengdu hub to Guangzhou’s Baiyun Airport — Air China’s new hub — and internal sources shared that a number of Airbus A330 will be transferred to the hub in the coming weeks. Guangzhou is a core metropolis of the Guangdong-Hong Kong-Macau Greater Bay Area, and the city is home to over 20 million people. In 2020, Baiyun Airport ranked the largest airport in terms of passenger throughput.
Air China is hoping to gain a share in an area that is considered one of the most promising markets in the country. As China Southern doubles down its effort in Beijing, the home court of Air China, the action taken by Air China is considered a sign that competition between the two rivals is intensifying with both airlines’ networks overlapping with each other’s.
Three Boeing 737s are now based in Urumqi, China’s Diwopu Airport, the largest airport in Xinjiang’s capital city. As the largest provincial district of China, the region has strong potential markets for airlines. Occupied largely by uninhabited areas, Xinjiang has its populations centered in a number of metropolitan areas that are far apart from each other. Additionally, the region is over 3,000 kilometers away from the economic center of China located in the eastern third of the country.
China Southern has been a long-term market dominator in the region, for both intra-Xinjiang travel and cross-country routes between Xinjiang and the rest of China. Air China, as said in its joint press release with Xinjiang Airport Group, is seeking to leverage Urumqi as a strategic point in China’s belt-and-road initiative to increase the coverage of its network in West China and Middle Asia.
“Air China will closely align follow the national development strategy, and better serve the market with an extensive network and top service,” the airline said in its 2020 annual report. The flag carrier of the country is actively planning its recovery and striving to occupy more markets as the passengers are coming back to airports.
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