China Southern: The blue dragon has risen.

Today, after years of production and bureaucratic delays, China Southern marked a significant milestone with the arrival of its first Boeing 787-8 in Guangzhou. The airline having taken delivery of the aircraft registered B-2725 on May 31.

The 787 delivery marks the next chapter in the transformation of China Southern. B-2725 will enter revenue service on 6 June, operating the inaugural service from Guangzhou to Beijing. Initially the aircraft will also be deployed on Guangzhou – Shanghai services. The 787s are expected to be deployed internationally by the end of 2013 on the ‘Canton Route’ between Australia and Europe, and to Vancouver. China Southern will receive five of the ten 787′s it has on order by the end of 2013.

President & CEO Tan Wangeng has previously said he “will spare no effort in building the Canton Route into a premium product” to be operated by Airbus A380s and Boeing 787s.

China Southern in 2015

Already big and getting bigger; China Southern is the largest passenger airline in Asia, carrying over 85 million passengers in 2012. The third largest by market capitalization. The sixth largest by fleet size. And, Skytrax’s most improved airline of 2011.

International operations currently account for only 18.4% of the carrier’s Available Seat Kilometres (ASKs), the smallest of China’s ‘big three’ airlines. 80% of its domestic route network, and 81.6% of its ASK capacity competes directly against high speed rail. The result? China Southern is turning to international markets with the aim of increasing its international ASKs to 35% by 2015.

Chairman Si Xianmin noted in a 2012 interview that “[we’re] looking at route expansion into South America, Africa and other emerging markets to expand our hub network. The broader vision of the Canton Route is to build Guangzhou as a global, comprehensive, long-haul aviation hub”.

Currently operating 35 weekly services to 5 Australian cities, Tan says that “More than 30% of the passengers travelling on this [Canton] route are from Australia and Europe”. Plans see this increasing to 55 weekly return services (110 total segments) to Australia by 2015. In addition, South American services are likely to operate through Nairobi, home of Skyteam partner Kenya Airways, linking three of the world’s largest developing markets.

However, if it is to win greater market share from other ‘Kangaroo route’ carriers, the airline will need to substantially improve the transfer experience at Guangzhou’s Baiyun Airport. One of those ‘only in China’ experiences, transferring at Baiyun remains a messy affair and while the carrier is developing a winning onboard product, the result of substantial focus and investment, its ground services lack the polish of competitors.

Urumqi hub

Ürümqi is China Southern’s strategically located second international hub. Ürümqi acts as a western entry point, one of the focus airports that the CAAC uses to efficiently distribute airline traffic across the China. A cooperation agreement signed in 2011 by China Southern – with its 75% international market share – and the Xinjiang Autonomous Region government, has seen Ürümqi Airport’s passenger traffic grow to become China’s fourth largest international airport. From Ürümqi the carrier offers services to the middle east, Turkey and following the resumption of services to Tashkent in July all of the CIS republics (except Moldova). Supported by expanding minerals exploration in the region, could China Southern leverage Ürümqi’s strategic location to reshape sixth-freedom traffic flows across Asia?

Opportunity much? Nearly 3 billion people live within 4.5 hours flying time of Urumqi. China Southern’s current international network from Urumqi, and connections to its other major China hubs.

Deploying the Airbus A380

Image: Xinhua.

In late 2012, almost a year after after taking delivery of the A380, international operations commenced with daily services from Guangzhou to Los Angeles. To date, this remains the sole international A380 route, with the aircraft otherwise restricted to domestic services.

Sources say upon EIS in 2011, the Civil Aviation Authority China (CAAC) restricted operations over concerns that cockpit flight crew English levels were insufficient to operate in a monolingual English environment, particularly in relation to the aircraft’s Electronic Flight Bag (EFB). An extensive and successful flight crew training programme during 2011-2012, resulted in the CAAC lifting operational restrictions.

China Southern originally planned to use the A380 on new services from Beijing, however the CAAC has long restricted competition between the ‘big three’ on international services, particularly direct competition with Air China in Beijing.

In 2012, China Southern entered into negotiations with Air China and it’s powerful coterie of interests, to operate joint-services from Beijing to Paris, and Frankfurt. Initial negotiations shaped the operation as a revenue sharing joint-venture with Air China code sharing on China Southern operated services. However by early 2013 talks were faltering; Air China changed its position, negotiating only to wet-lease the aircraft, to operate and market the proposed Paris services as Air China only services. In early May, China Southern Chief Financial Officer Xu Jiebo reported “the discussions were suspended as many issues arising during the negotiations couldn’t be resolved”.

Central to this was disagreement on Terminal access at Beijing. With Air China operating from Terminal 2 and China Southern Terminal 1 at Capital Airport the carriers would be unable to offer seamless connections. This would only be compounded further when China Southern relocates its operations to the new Beijing Daxing Airport when it opens in 2017.

The result? China Southern will now operate the A380 daily from Guangzhou to Sydney from October 27, preferring not to compete head-to-head with Air China. Tan says “on our current Sydney route we operate [a] double daily using our A330 aircraft and the load factor has been very satisfying, which means we can operate a triple-daily service. We have studied if the market will be big enough to digest this capacity”.

China Southern’s ambitions for Australia are big, but just how realistic these ambitions are remain to be seen. China Southern is on the verge of being unleashed in the same way Emirates was 10 years ago. A blue dragon is rising, and it’s winging its way to a city near you.

Image: Jay Miller.

Australia’s obsession with engaging Asia: Can aviation play a role?

爱国 àiguó: to loves ones country/patriotism. Image: AP

It’s been awhile since I’ve written a post, and to kick things off again I thought I’d take a look at Australia’s renewed obsession with Asia, triggered by the Australian Government’s recently released Asian White Paper.

I went to a fascinating forum last week on Australia’s Engagement in Asia through Future Foreign Policy. Hosted by AsiaLink at Melbourne University, and to be broadcast on newsline this Thursday November 22, the Q&A style event saw Liberal MP Kelly O’Dwyer and Labor MP Richard Marles answer audience questions on Asia and what we as a country are trying to do with/about it. I say fascinating because it became clear during the course of the forum from the disconnected and vague responses that past the fact it’s there, good for foreign investment, and we should be doing something about it, neither Kelly or Richard have much clue about Asia.

The audience for this event were a culturally diverse bunch. Over 150 people who from the various questions, were already very ‘engaged’ with clear personal interest or involvement with Asia. Most of the people seemed to emigrated from, or lived, studied, worked overseas and at the very least the majority spoke an Asian language or had a son/daughter learning one. So why was Richard’s best answer to a question on how should young Australian’s engage with Asia, to “go out and make friends, just go overseas study, make friends”. Clearly sir, we’ve already done that.

The introductions were centred on reeling off growth statistics from what I like to call the ‘Asian Wheel of Fortune’, as the reason we need to engage. We were told how Australia is an activist middle power, great at managing countries smaller than us, or acting as a go between. We don’t need to choose between America and China, yet we aren’t willing to accommodate China unless it sticks to the rules based international system. Forgetting that America isn’t the best country to follow on that one.

Another audience member wanted to know if Asia wanted to engage with Australia. Do they really? An emphatic “Yes!”, apparently they do, because as we have seen, they want to buy our mineral resources. But I really don’t think we can consider buying iron ore engaging across multiple sectors.

An important cultural question popped up, Korea and Japan are great at using their soft cultural power overseas to promote design, art, music. “Why doesn’t Australia move out of sport and do that to?” Luckily, both Kelly and Richard agreed this would be great! The Japanese went wild for the Australian Ballet, but when they wanted to go to China last year to tour, there was no funding so they went to New York instead. Apparently it’s cheaper to fly twice the distance.

The Australian Government has been there and done this before in the 1980s and early 1990s never to follow through. From the crowd of people gathered at Melbourne University there is clearly a growing population in Australia that wants us to be involved with something greater than Bali and Phuket. The intention of both parties is right, but everyone seems to blindly fumbling when it comes to what to do.

As opaque as China’s leadership is, behind Thursday’s unveiling of a new China management team we saw a government fully aware that’s economy is slowing and needs to do something else. An economy in which Australia has placed the good majority of its eggs. If the Chinese government can see it needs to diversify, why can’t Australia’s?

How does aviation fit in?

Aviation featured vaguely in the Asian Century White Paper, with a small case study into Indian Investment into Gippsland Aero, and the failings of Sydney Airport. That was it. Australia’s aviation industry is growing, we can boast of one of the world’s safest aviation regimes, with a mass of incredibly talented people across airlines, air traffic control, training, safety, regulation. Combining this with perhaps the world’s most globalised industry, the aviation industry seems to be the perfect vestibule through which to engage with our northern neighbours. If the government and the general population are truly serious that is. Are you onboard?

The Australian Government’s Australia in the Asian Century White Paper

Beijing and the world’s biggest airport complex.

Airports and airlines are fast replacing the bicycle as a symbol of China’s transformation. In the 1980s, China had a single airline Civil Aviation Administration of China (CAAC) operated and branded airline with over 20 types of aircraft. Many airports were little more than a landing strips, with ad hoc ticketing, chaotic boarding and restrictions on who could travel.

20 years later and Beijing has made aviation development one of the central elements of the 12th and current five year plan. This includes the construction of 82 new airports, expansion of 101 existing airports, lifting of restrictions on general aviation and flying training, a move toward forcing the PLA Air Force to open some of its restricted airspace, and support for aircraft development.

Of these 82 new airports, one will be Beijing’s second international airport in Daxing. People inside and outside China are used to Beijing’s focus on massive infrastructure projects. Not long ago, this could have been attributed to nationalism and a fierce need to maintain GDP targets to continue development, in 2012 growth of essential industry sectors simply demands it.

Upon opening the airport will replace Nanyuan Airport in Beijing’s south, and become the Beijing hub for China Eastern, China Southern and their Skyteam alliance partners.

Although carrier groups and alliances will be segmented, the effect on airline operations has been largely avoided in official planning. An expansion of the current Capital International Airport would avoid the need to split operations, providing airlines with better operational flexibility and integrity, avoiding a messy situation that now occurs in Shanghai.

Beijing Daxing Airport will be the:

  • largest infrastructure project in China’s history (reportedly bigger than the Three Gorges Dam);
  • first airport to be designed from the outset for a passenger capacity of 100 million people per annum;
  • largest airport in the world when it opens in 2017;
  • biggest Skyteam airline alliance hub; and
  • most integrated airport into central public transport systems.

In addition, with Beijing Capital International Airport already the second busiest airport in the world, and likely to overtake Atlanta in 2012, the project will perhaps eventually give Beijing the title of having the first and second busiest airports in the world.

Beijing Daxing Airport will have 2 concourses, and 2 satellite terminals; 8 runways, 6 parallel alligned north-south, and 2 alligned east-west. Image: NACO

The Beijing Municipal Government has selected a consortium led by NACO Netherlands Airport Consultants as the designers of the city’s second international airport at Daxing.

Four years from conceptual design to opening…that’s a big ask. But in China where there are 5-year plan targets to meet, and officials’ next promotions are tied to meeting these regardless of quality, work gets done. Let’s just hope this means the roof tiles won’t fall off again.

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