Flying high

Soaring demand in China for planes and pilots

A Hainan Airlines plane takes off from the Sanya Phoenix International Airport in Sanya, China.
A Hainan Airlines plane takes off from the Sanya Phoenix International Airport in Sanya, China.PHOTO: REUTERS

New airlines with deep pockets seek piece of action in booming domestic travel market

ZHUHAI (Guangdong) • China's appetite for planes and pilots is building up, whetted by a slew of new airlines launched in the last three years as local governments, private firms and larger carriers fight for a share of the fast-growing domestic travel market.

More than 10 Chinese carriers have begun flying since Beijing's aviation regulator relaxed a six- year suspension on new airline licences in 2013. They now operate or have ordered at least 100 jets made by Europe's Airbus, US giant Boeing and Embraer of Brazil.

Such breakneck expansion might give cause for alarm in mature aviation markets. But China's new breed of carrier is focusing on second- and third-tier cities with gleaming, newly built airports that helped stoke an 8.2 per cent rise in domestic passenger traffic last year, according to the International Air Transport Association.

While state carriers such as Air China , China Eastern Airlines and China Southern Airlines dominate for now, the newcomers have deep-pocketed backers such as conglomerate HNA Group, plus support from the local authorities and Air China itself.

"By 2020 we want to have 40 to 50 planes," said Mr Lan Yu, brand manager at Guangxi Beibu Gulf Airlines, a newcomer set up by the government of Guangxi province in the south-west and Tianjin Airlines last year.

 
 

Tianjin Airlines is a unit of HNA, an aviation and shipping giant with more than US$100 billion (S$139 billion) in assets that itself is expanding fast into the hotel trade overseas.

Guangxi Beibu will fly 13 Embraer E190 regional jets and three Airbus A320s to 28 Chinese cities by the end of this year, Mr Lan said. With average seat occupancy of more than 90 per cent since flights began, the carrier is already profitable, he added.

  • 10

    Number of airlines that have applied for air operator certificates.

  • 48

    Number of passenger airlines at the end of last year, up from 36 at the end of 2012.

Aircraft makers like Boeing welcome the newcomers, provided they are financially sound.

"We obviously look a little more closely at new airlines to make sure we account for the risk, but we're not seeing any issues with the ones that have started up in China," said Mr Darren Hulst, Boeing Commercial Airplane's managing director of marketing for North- east Asia.

At least 10 airlines have applied for air operator certificates, according to company statements and local media reports.

At the end of last year, China had 48 passenger airlines, up from 36 at the end of 2012, data from the Civil Aviation Administration of China (CAAC) shows.

Along with racking up aircraft orders, the new airlines are advertising pay packages up to 50 per cent higher than their established rivals' as they find it tougher to attract staff, said Ms Sherrie Luo, general manager of Hong Kong- based crew recruitment firm Smile Aviation.

Hongtu Airlines, based in the south-western city of Kunming, is offering Airbus A320 pilots monthly salaries of up to US$25,500, according to advertisements on Smile Aviation's website. Pilots heading to China Eastern can expect up to US$18,500 a month.

Some industry experts caution that China's blossoming aviation market runs the risk of a price war, as the CAAC relaxes restrictions to allow airlines to set ticket prices for more routes.

"Some of the airlines may lower their pricing drastically to get the competition out of the route so they can maintain market share," said Mr Bjarki Arnason, head of the Shanghai-based consultancy Avi- Asia. "The competition can be pretty fierce in this environment."

Still, he said, Beijing will be vigilant to protect its growing industry. "I doubt the government will actually allow (a price war) to happen."

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 02, 2016, with the headline 'Soaring demand in China for planes and pilots'. Print Edition | Subscribe