Tag: Air China

U.S. to Revise Chinese Passenger Airline Ban After Beijing Move

June 4, 2020 / WIL BALDWIN

A China Eastern Airlines aircraft is seen at Hongqiao International Airport in Shanghai

WASHINGTON (Reuters) – The U.S. Transportation Department plans to issue a revised order in the coming days that is likely to allow some Chinese passenger airline flights to continue, government and airline officials said.

On Thursday, China said it would ease coronavirus restrictions to allow in more foreign carriers, shortly after Washington said it planned to bar Chinese passenger airlines from flying to the United States by June 16 due to Beijing’s curbs on U.S. carriers.

The change should allow U.S. carriers to resume once-a-week flights into a city of their choice starting on June 8, but that would be still significantly fewer than what the U.S. government says its aviation agreement with China allows.

The Transportation Department did not immediately comment.

The department said on Wednesday Chinese carriers could operate “the same number of scheduled passenger flights as the Chinese government allows ours.” It added the order was to “restore a competitive balance and fair and equal opportunity among U.S. and Chinese air carriers.”

The U.S. order would halt the four weekly U.S. roundtrip flights by Air China <0753.HK>, China Eastern Airlines Corp, China Southern Airlines Co <1055.HK> and Xiamen Airlines Co.

U.S. and airline officials have privately raised concerns about the revised Chinese rules and it is unclear if carriers would agree to fly just once a week to China when they have sought approval for two or three daily flights.

Delta Air Lines <DAL.N> and United Airlines <UAL> asked to resume flights to China this month. Both said they were reviewing the order from the Civil Aviation Administration of China.

American Airlines <AAL> is sticking with its previous plan to resume service to China at the end of October, spokesman Ross Feinstein said.

The CAAC said all airlines can increase the number of international flights involving China to two per week if none of their passengers test positive for COVID-19, the disease caused by the novel coronavirus, for three consecutive weeks.

If five or more passengers on one flight test positive upon arrival, the CAAC will bar the airline for a week. Airlines would be suspended for four weeks if 10 passengers or more test positive.

(Reporting by David Shepardson in Washington; additional reporting by Tracy Rucinski in Chicago; Editing by Chris Reese, Richard Chang and Bernadette Baum)

China Southern Air Holding Sets Up One Billion Yuan Cargo Company

December 26, 2019 / WIL BALDWIN

China Southern Airlines Airbus commercial passenger aircraft is pictured in Colomiers near Toulouse

BEIJING (Reuters) – China Southern Air Holding, the parent of China Southern Airlines <ZNH>, has set up a cargo company with registered capital of 1 billion yuan ($143 million), as it looks to consolidate its air cargo assets through state-led reforms.

The move from December 24 was disclosed by a filing approved on the National Enterprise Credit Information Publicity System and comes as China prioritizes implementing mixed ownership reforms to revamp its bloated, debt-ridden state sector.

China Southern is among 96 centrally owned companies supervised by the state assets regulator, the State-owned Assets Supervision and Administration Commission (SASAC).

As such, China Southern Airlines would offload its old freight unit to the newly registered company, according to a statement from SASAC in October. The cargo company would also take over other air cargo assets under the parent company such as belly cargo services, cargo terminals and international logistics.

The cargo business would be managed in a market-oriented way and would become a major source of profits, said the SASAC.

The air cargo market, an economic bellwether linked to global trade, saw its traffic decline by 3.3% in 2019, the International Air Transport Association (IATA) said, driven by a tariff war between the United States and China.

In 2017, China Eastern Air Holding <CEA> sold almost half of its freight unit to four firms, while Air China <AIRYY> last year offloaded a majority stake in its cargo arm in face of market uncertainties.

($1 = 7.0016 Chinese yuan renminbi)

(Reporting by Stella Qiu and Brenda Goh; Editing by Gareth Jones)

Foreign Airlines Face New Rivals As China Route Restrictions Ease

September 26, 2018 / WIL BALDWIN

SHANGHAI (Reuters) – Foreign airlines that fly on 20 popular long-haul routes to China will face fresh competitive pressure as Beijing begins to ease decade-old restrictions on Oct. 1, allowing more Chinese carriers to offer service.

The change affects about 20 percent of Chinese long-haul daily capacity, according to data compiled for Reuters by Chinese aviation data firm Variflight.

It will turn up the heat on U.S. and European carriers like United Airlines (UAL.O) and Air France KLM (AIRF.PA), which have higher costs, lower outbound demand from their countries and less cultural appeal to Chinese travelers.

“The North American and European airlines are no match for the Chinese carriers,” said Corrine Png, chief executive of Singapore-based transport consultancy Crucial Perspective, citing the majority of traffic being driven by Chinese customers.

Some have already abandoned Chinese routes, with American Airlines (AAL.O) recently planning to drop Shanghai-Chicago service after also cancelling Beijing-Chicago and describing the routes as a “colossal loss-maker” that cost it $30 million a year.

The “one route, one airline” policy had been in place since 2009; altering it now is a response to the changing aviation market, China’s Civil Aviation Authority has said.

Two of the routes, Shanghai-Paris and Shanghai-Frankfurt, already have two Chinese airlines flying them but can add one more.

‘LITTLE INFLUENCE’

Variflight’s chief data analyst, Cong Wei, said Chinese airlines controlled about 50 percent of the seats on the 20 routes, which include Beijing-Los Angeles and Shanghai-London, and had the potential for a much higher share.

These routes are divided up between state-controlled carriers China Eastern Airlines Corp Ltd <600115.SS>, China Southern Airlines Co <600029.SS> and Air China Ltd <601111.SS>.

They compete against foreign airlines including Air France KLM, Lufthansa (LHAG.DE), Air Canada (AC.TO), British Airways (ICAG.L), Virgin Atlantic [VA.UL], Air New Zealand (AIR.NZ), United Airlines, Delta Air Lines (DAL.N) and American Airlines.

An Air France KLM spokeswoman said the company was monitoring the regulation change but had “very little influence on how this rule could evolve.”

“Competition between Europe and China is already present and increasing,” the spokeswoman said. “We continue to enhance our existing partnerships to offer the most attractive products and services at competitive fares to all our customers. This is undoubtedly the best response to this eventuality.”

Delta Air Lines said China continued to be an important market for its long-term network and that it was well positioned because of its partnership with China Eastern. Air New Zealand said it was aware of the change and was constantly assessing new route opportunities.

Lufthansa, Air Canada, British Airways, Virgin Atlantic, United Airlines and American Airlines did not respond to requests for comment.

TIE-UPS

The policy would also likely hurt incumbent Chinese airlines like Air China, which under the old rules had been able to dominate the Beijing-Los Angeles route. Many Chinese airlines are already facing falling returns on their international business.

Rivals like Hainan Airlines <600221.SS>, China’s fourth-largest carrier, have been expanding their international business in secondary routes and could take on new ones, analysts said. Out of the 20 routes opening for competition, Hainan only flies between Beijing and Toronto.

China Eastern and China Southern, headquartered respectively in Shanghai and Guangzhou, are also expected to launch new routes from Beijing once the Chinese capital’s new second airport opens in late 2019, giving the two state-owned airlines secondary bases.

The opening of Beijing Daxing International Airport was a catalyst for the government’s decision to change the route policy, the Chinese aviation regulator said in May.

China Southern said it supported the policy change, while China Eastern declined to comment. Air China and Hainan Airlines did not respond to requests for comment.

Li Xiaojin, a professor at the Civil Aviation University of China, said foreign carriers could focus on developing services for the luxury end of the Chinese market or deepen recently forged tie-ups with Chinese carriers to try to retain a competitive edge.

Delta Air Lines and American Airlines respectively have small equity stakes in China Eastern and China Southern, while China Eastern owns a 8.8 percent stake in Air France KLM.

But Li said the ultimate winner would be Chinese travellers.

“By liberalizing international air rights, airlines will put more capacity on popular routes, at hot timings … and provide passengers with safe, more convenient, more comfortable and economical services,” he said.

(Reporting by Brenda Goh; Additional reporting by SHANGHAI Newsroom; Editing by Gerry Doyle)

China Regional Jet Market Hits Regulatory Turbulence

June 26, 2018 / WIL BALDWIN

SHANGHAI (Reuters) – China’s regional jet market is struggling to get off the ground as Beijing slows approvals for new airlines, industry executives say, dashing hopes that recent policy changes would drive aircraft sales.

Foreign companies such as Bombardier Inc (BBDb.TO), Embraer SA (EMBR3.A) and ATR had cheered a 2016 policy that required passenger carriers to operate at least 25 city-hopper jets before graduating to bigger aircraft.

It appeared to all but assure sales of such small planes in the world’s fastest-growing aircraft market, currently dominated by wide-body jets, as the regulator tried to boost flights into China’s smaller cities.

But there is a problem, executives say: the Civil Aviation Administration of China (CAAC) has only approved two new airlines since the “Rule 96” policy went into effect.

“The truth is that almost two years has passed and I have not succeeded in one single deal,” said one executive from a Chinese aircraft lessor speaking on condition of anonymity, who added that he had met with numerous start-ups to promote regional aircraft.

The executives added that although the slowdown was probably well meaning, caused by regulators’ concerns over safety and quality, it meant that there was a queue of at least six Chinese airlines waiting for approval.

The policy had stoked optimism among regional aircraft makers, as Chinese airlines have for years mostly focussed on growing their fleets of Airbus (AIR.PA) and Boeing

Out of 3,311 commercial aircraft flying in China at the end of March, just 5 percent were regional jets, the CAAC said in April. By comparison, regional jets in 2016 took up 30.6 percent of the 7,039-strong fleet of aircraft in the United States, according to data from the Federal Aviation Administration.

“The intention is that (the regulators) want to push, but they have enhanced the entry barriers so they have very high standards for the investors,” said Wang Qi, chief China representative for French turboprop manufacturer ATR, which is renewing its Chinese certification.

Chinese airlines in general have a good safety record.

The CAAC did not respond to requests for comment.

PATIENCE AND FRUSTRATION

For many, Rule 96 underlined Beijing’s intentions to improve regional air transport. The country’s 13th five-year plan for 2016-2020 included 500 new airports.

But only Tianjiao Airlines in Inner Mongolia and Air China <601111.SS> <0753.HK> subsidiary Beijing Airlines, which converted from a private charter operator to a passenger airline, were approved last year.

An executive at Tianju Airlines, which is waiting for the green light to start carrier operations from central China’s Shaanxi province, said regulators grew more cautious.

But he said the airline hopes to fly next year, after four years of preparations and at least one change to its proposal to adjust to CAAC policies.

“We currently fulfil all conditions,” said the executive, who only gave his surname as Li because he was not authorised to speak to the media.

AirAsia Group (AIRA.KL), which is working with local partners to establish a low-cost carrier in China, has looked at options like buying an existing air operator’s certification to speed things up, according to two sources familiar with their plans.

The company, which last year signed a memorandum of understanding with China Everbright Group and the Henan government, declined to comment.

OPTIMISM

The only aircraft that meet Rule 96’s seat limits of 100 or less and are certified to be sold in China are Commercial Aircraft Corp of China Ltd’s [CMAFC.UL] ARJ-21, AVIC Aircraft’s <000768.SZ> MA60 turboprop and Bombardier’s Q400 and CRJ 900 models.

Bombardier and Embraer said they remained optimistic about their prospects in China.

“The situation under Rule 96 continues to evolve,” Bombardier Commercial Aircraft’s President Fred Cromer said in an interview with Reuters at the company’s Montreal-area factory in the Canadian province of Quebec last week.

“The fact that we have a plane that’s well known by the authorities there and an operator that operates quite a few works in our favour,” he said in reference to Bombardier CRJ 900 operator China Express.

Embraer said in an e-mail that it expects its E175 jet to obtain CAAC certification by September.

But Corrine Png, chief executive of transport consultancy Crucial Perspective, said Chinese airlines were still more inclined to buy larger jets to meet surging travel demand amid a shortage of landing slots and pilots.

“It would be costly to maintain a small number of regional jets in China which may not be economically efficient from the Chinese airlines standpoint,” she said.

HOMEGROWN COMPETITION

Industry insiders are also concerned that Beijing may be promoting China’s domestically produced aircraft over more advanced models.

COMAC put the ARJ-21 regional jet into service in 2016 and has delivered just five so far. But it has orders for 450 planes, dwarfing the numbers for Bombardier and Embraer’s in China.

Tianju Airlines told Reuters it had considered Airbus’ A320 and Embraer E190 jets but decided to buy the ARJ-21.

“We think it’s the most suitable model for us,” said Li, who declined to comment further.

ATR’s Wang said the turboprop maker planned to look beyond regional jets and consider general aviation, which Beijing has also pledged to support with infrastructure investment.

Any company can buy an aircraft and begin operating it for charters, for instance. That means ATR could reconfigure its 42-seat model into a 30-seat offering for such businesses, he said.

“That category has very low barriers and there are potential investors for ATR,” he said.

(By Brenda Goh, additional Reporting by Allison Lampert in MONTREAL, Jamie Freed in SINGAPORE, Brad Haynes in SAO PAOLO and the SHANGHAI Newsroom; Editing by Gerry Doyle)

Air China and United Airlines expand partnership

March 25, 2016 / WIL BALDWIN

Air China and United Airlines have signed an agreement that expands their existing strategic partnership. With the new long term agreement, Air China and United will established a joint initiative to improve the coordination of routes and schedules between the airlines. This will serve to enhance the product service to their customers in US and China. The improvements will include expanding connecting flight options, enhancement of the joint operation route experience for customers, improving benefits for elite frequent flyers, and the coordination and expansion of its joint marketing operations. The new initiative will be led by senior executives at both airlines, who will hold regularly scheduled meetings to coordinate the rollout of new initiatives, promote the integration of cultures, and prep both companies for the possible future expansion of the existing agreements.

Air China and United Airlines joint Pacific operations

United Airlines currently operates three nonstop routes to mainland China from its San Francisco International Airport gateway hub. United will also be launching new nonstop service to an additional two cities in mainland China when service to Xi’an starts on May 8, 2016, and Hangzhou beginning on July 13, 2016. Both of those new routes are pending government approval. Air China and United Airlines are both members of the Star Alliance, operating codeshare flights on 47 routes in China, 72 routes in the US and Mexico, and 16 Pacific routes between China and the United States.

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