Chinese Commercial Aviation Developments

Chinese Commercial Aviation Developments


Chinese Commercial Aviation Developments

As the Chinese people are noticing the benefits of air travel, airlines are developing and cargo flights are on the increase. China’s manufacturing industry is still very competitive and the best way of getting their products to the rest of the world is via air cargo.

In tis blog will will show you what new developments are happening in the current Chinese market. A particular emphasis on the Zhengzhou Airport, where many interesting things are happening.

The Zhengzhou Development Area is located in Linangang in the southeastern part of Zhengzhou City. Its planned scope totals 12.49 square kilometers. With a distance of 7 kilometers from the urban center and 1.5 kilometers from the edge of the urban central complex, the Development Area is an important part of the Putian Export-oriented Economic Complex in east Zhengzhou
Zhengzhou lies in central China's Henan Province. As early as 3,500 year ago, it was an important city of the Shang Dynasty. At present, Zhengzhou is a key trade, commercial and resource distributing center in China.


Zhengzhou has a total proved coal reserve of over 5 billion tons, refractory clay 100 million tons and beauxite 100 tons. Abundant in oil shale reserve, Zhengzhou stands as one of the largest natural oil shale reserve bases in China.
?Zhengzhou now has 3,778 scientific and technological institutions staffed by more than 400,000 engineers, technicians and other professionals. The city owns 20 colleges and universities, 13 schools of higher education for adults, and 8 units that are accredited to offer post-graduate programs.

?Four major industries have come into shape in the zone, namely, information electronics, electrical appliance, printing and packaging, and food processing.

Cargolux acquisition boosts cargo throughput but feelings are uneasy

Zhengzhou and Henan quickly became better known when Cargolux in Dec-2013 approved closer cooperation with HNCA following Luxembourg's decision to sell its 35% stake to HNCA. The transaction was one of those long and complicated ones that has left a bit of a bitter taste. The European side sees the deal as short-sighted on Luxembourg's part and is sceptical if HNCA is committed to Cargolux for the long term or is using the investment to learn about cargo and then start an operation that would challenge Cargolux…

As part of the cooperation, Cargolux started flights to Zhengzhou, adding to its existing services to mainland China. Henan helped obtain rights and permits, although the service launch was repeatedly delayed. Cargolux commenced Zhengzhou services in Jun-2014, initially twice weekly but with plans to increase to four weekly in Jul-2014 and six weekly in Sep-2014. However, the fifth weekly service was only introduced in Nov-2014.

Although the partnership remains difficult, the two sides present a dynamic marketing view. Cargolux named one of its 747-8 freighters "City of Zhengzhou" and in Nov-2014 both sides celebrated Cargolux carrying its 10,000th tonne of cargo on the Luxembourg-Zhengzhou route since its Jun-2014 commencement.

Cargolux has grown outside of Zhengzhou during the partnership, increasing flights to Beijing and Xiamen.

Zhengzhou and Henan Province to establish new cargo airline with Cargolux

Cargolux and HNCA will form a new JV carrier, Cargolux China, that in 2015 will reportedly operate trans-Pacific routes from Zhengzhou to Chicago and Los Angeles. Operations to Australia are also reportedly being considered, with the JV airline considering 747 and 777 freighters, as well as 737 freighters.
Cargolux China operating to North America means it will not compete with Cargolux between China and Europe – or at least not yet. Cargolux does not operate from China to North America but it does operate from Hong Kong to North America. This raises the question if Cargolux at a later stage could have operated from China to North America, but Cargolux China's operation seems to make that possibility redundant.

Second new Zhengzhou airline to be LCC with First Eastern Investment, co-owner of Japan's Peach Aviation

With a lot of cargo activity boosting Zhengzhou Airport’s strength, another area that it is encouraging is the passenger side. In Jun-2014 it was reported that First Eastern Investment and Zhengzhou City Manli Transportation Group signed an agreement to jointly establish a LCC based in Zhengzhou. First Eastern Investment will invest USD50 million for a 49% stake in the proposed LCC, which could commence operations in mid-2015 at the earliest with an initial fleet of three leased A320s growing to six A320s in its second year. Domestic and regional (Hong Kong, Japan) destinations were being considered.

First Eastern is a Hong Kong company and is an investor in Peach Aviation, the Osaka Kansai-based LCC. At the time First Eastern said Peach was invited to support the launch or even become a stakeholder but there has been no update since.

Having an eventual presence in mainland China is partially what attracted All Nippon Airways to having First Eastern invest in Peach. ANA is a minority shareholder in Peach but was actively involved in Peach's launch. However, it is unlikely a LCC in a smaller inland city holds much interest for ANA or Peach; Beijing and Shanghai or a larger second-tier city would have been interesting and more sustainable. Peach's involvement would have far greater benefit to the Chinese LCC than to Peach, where synergies would be limited. The China-Japan mood has been further dampened by China-Japan relations that have weakened considerably.

China Southern has opened a branch at Zhengzhou

Zhengzhou airport will see expanded passenger operations from China Southern Airlines Henan, a JV launched on 19-Sep-2014 between China Southern and Henan Civil Aviation Development and Investment Co. The airline is wholly integrated within China Southern so that passengers do not notice the development. Henan benefits by potentially gaining a larger network than if China Southern developed on its own. Some routes that Henan will likely want will probably be subsidised. China Southern benefits from gaining local support in slot and traffic rights while also receiving various financial benefits. The JV is 60% owned by China Southern with capital of CNY3600 million (USD562.5 million) and 40% by Henan with CNY2400 million (USD375 million). Total investment is CNY6000 million (USD937.5 million).
China Southern Henan is built on the assets of China Southern's Henan branch company, which has 25 x 737s. China Southern accounts for about one third of the available seats at Zhengzhou and, according to China Southern, half in Henan province. 95% of Zhengzhou's passenger capacity is within the domestic market.

It is unclear how China Southern's expanded presence will mesh with Zhengzhou's planned LCC. China Southern serves 32 Chinese airports from Zhengzhou, according to OAG data. That does not leave much room for a LCC. The central and western market is low yielding, meaning China Southern will already be competing aggressively and is unlikely to want further competition. It is also unclear how China Southern will co-exist with Cargolux and the planned cargo start-up. Both of those parties will look to have a role in the freight market from China to North America. China Southern has two weekly freighter flights from Zhengzhou to Anchorage and onwards to Chicago, and then two weekly flights from Los Angeles to Zhengzhou and back to Guangzhou, according to OAG data.

Henan Province trying to woo Boeing for a delivery completion centre

Henan wants to create a hub for traffic but also airframe activity. Henan has expressed interest in aircraft-focused activity ranging from assembly lines to MRO to training. Assembly is surely an ambitious aspiration; Tianjin supports final assembly as it is linked with a free trade zone. Henan and the CAAC have reportedly agreed to try to woo Boeing to establish a delivery centre in Zhengzhou. Boeing has declined to comment on these reports.

A Boeing delivery centre could theoretically be similar to Airbus' planned A330 completion centre, although Boeing lately has been looking to insource assembly and finishing work. Boeing already has completion activity in China through JVs although for VIP and special outfit aircraft. It is clearly Henan that is pushing for this and could stand to gain the most directly. Boeing's indirect benefit would be a Zhengzhou centre creating more business for it in China, or keeping business it could lose if it did not have the centre.

Outlook: hubs need investment and nurturing, but also time

Henan has clearly realised the profound impacts of being an aviation hub and supporting it will have on the economy. Henan sees hubs need financial investment as well as nurturing through advice and partnerships, and is doing all of this. The downside is the compressed time in which Zhengzhou is aiming to do all of this. Hubs do not sprout overnight; time allows for sustainable growth as the hub sees what does and does not work. The rushed speed has also lessened the ability to have a pleasant bedside manner, so to say, leaving many parties feeling bruised – and probably rightfully so. Zhengzhou and Henan have a strong determination to be a hub and are working towards it, but will find they cannot reach their objective alone.

要查看或添加评论,请登录

Fabrizio Poli的更多文章

  • The Rise & Fall of the Lilium Jet

    The Rise & Fall of the Lilium Jet

    Lilium, a German aerospace company, aimed to revolutionize urban air mobility with its Lilium Jet, an all-electric…

  • February 2025 Updates in the Business Aviation Sector

    February 2025 Updates in the Business Aviation Sector

    Introduction As we move through the early months of 2025, the business aviation sector continues to demonstrate…

  • How to Become a Pilot in 2025 & Beyond

    How to Become a Pilot in 2025 & Beyond

    My Story I grew up dreaming of becoming a pilot. Unlike many kids who fantasize about flying, I actually made it happen.

    6 条评论
  • Airline Travel Problems Ahead in Coming Months. Is it Time to Fly Private?

    Airline Travel Problems Ahead in Coming Months. Is it Time to Fly Private?

    The airline industry is bracing for significant disruptions in the coming months, which could lead to a surge in demand…

  • Fall in Demand of Global Private Jet Charter

    Fall in Demand of Global Private Jet Charter

    Why global business aviation flying in October fell 0.6 percent year-over-year There are a few possible reasons why…

    1 条评论
  • Business Travel After COVID-19

    Business Travel After COVID-19

    While there is a concern for people's health with this COVID-19 pandemic taking the world by storm, it seems to me that…

    3 条评论
  • Coronavirus Effect on the Aviation World

    Coronavirus Effect on the Aviation World

    Airline World Following original analysis published in February 2020, IATA has released updated figures suggesting an…

    1 条评论
  • Could this Anti-Gravity Flying Machine be the New Private Jet?

    Could this Anti-Gravity Flying Machine be the New Private Jet?

    Warning: The information that follows may sound like it comes out of Star Trek or Stargate SG-1. or another sci-fi…

    6 条评论
  • 10 Reasons for Drones & More...

    10 Reasons for Drones & More...

    This week drones got a bit of a bad rap because they disrupted air traffic at Madrid Airport in Spain. In the video…

  • 5 Things to Avoid When Buying a Private Jet

    5 Things to Avoid When Buying a Private Jet

    I always tell people that buying a private jet needs to be approached in a professional & careful manner. A lot of…

    9 条评论

社区洞察

其他会员也浏览了