Chinese expansion:
the next disruption?
March 2018
Peter Bellew — erstwhile CEO for a short time of Malaysia Airlines, and now back at Ryanair — commented at the AAPA annual meeting eighteen months ago that the development on tourism outbound from China reminded him of the excitement of the explosion in European tourism to the Mediterranean in the 1970s: lack of infrastructure meant building and operating hotels; poor local controls led to hastily constructed facilities and the delights of such as the Costa del Sol; but the growth led to huge opportunities.
The following chart and table are the results of detailed analysis that arose from a recent project we at Aviation Strategy produced looking at the markets in Asia. Various other commentators have noted the way that the Chinese carriers have increased the number of destinations they serve outside the country as outbound tourism has been developing. In this analysis we have looked at the growth in the number of seats.
The growth has been astounding. The largest outbound route in 2010 was to Hong Kong. In part this was a surrogate for transition to other parts of Greater China — notably Taiwan. Since then the Chinese state has relaxed restrictions on cross-straits travel and the Hong Kong-China route has only seen growth of a compound 4% — most of it left to Cathay to feed its hub — while routes from mainland China to Taiwan have grown by an annual compound 9% in the intervening years.
Now the two largest routes are to South Korea and Japan. In each case the market has grown by a reasonable 8% a year — but Chinese carriers have increased operations by a compound 10% a year.
More extraordinary has been the growth in services between China and Thailand. Between 2010 and 2017 the total number of seats scheduled has grown by an annual average rate of 27%. Within this the Chinese carriers have increased capacity by an average 33% and this route is now the third largest by total seat capacity.
What is a bit strange is that, despite this huge growth on International routes, how few routes are dominated or led by the Chinese carriers; China Eastern has a 22% share on the routes to Japan, 38% to Myanmar and 31% to India. China Southern has a lead position on routes to Australia with 34% of the capacity, 29% to Cambodia and 35% to New Zealand.
As they continue to grow this will change.
| CAGR 2010-2017 | Top Players 2017 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rank 2017 | Between China and | Seats 2017 (m) | Total Market | Chinese | #1 | share | growth | #2 | share | growth | #3 | share | growth |
| 1 (2) | S Korea | 22.2 | 8% | 10% | Korean | 22% | 5% | Asiana | 21% | 3% | China Eastern | 15% | 9% |
| 2 (3) | Japan | 19.7 | 7% | 10% | China Eastern | 22% | 7% | All Nippon | 18% | 5% | Air China | 16% | 3% |
| 3 (6) | Thailand | 19.3 | 27% | 33% | Thai AirAsia | 11% | 39% | Thai Airways | 11% | 7% | China Southern | 10% | 25% |
| 4 (1) | Hong Kong | 18.7 | 4% | -1% | Cathay Dragonair | 46% | 4% | Hong Kong AL | 18% | 23% | China Eastern | 10% | -2% |
| 5 (4) | Taiwan | 12.8 | 9% | 12% | China Airlines | 18% | 9% | EVA | 15% | 9% | China Eastern | 12% | 11% |
| 6 (7) | USA | 10.1 | 18% | 25% | United | 20% | 10% | Air China | 19% | 18% | China Eastern | 16% | 21% |
| 7 (5) | Singapore | 8.3 | 10% | 8% | SIA | 26% | 2% | Scoot | 14% | ∞ | China Eastern | 11% | 3% |
| 8 (8) | Malaysia | 6.8 | 12% | 18% | AirAsia | 30% | 14% | AirAsia X | 27% | 15% | Malaysia AL | 12% | -2% |
| 9 (15) | Vietnam | 4.6 | 22% | 20% | Vietnam AL | 39% | 21% | China Southern | 28% | 19% | China Eastern | 8% | ∞ |
| 10 (14) | Australia | 3.9 | 19% | 20% | China Southern | 34% | 20% | China Eastern | 24% | 18% | Air China | 16% | 10% |
| 11 (11) | Russia | 3.3 | 10% | 6% | Aeroflot | 44% | 17% | S7 Airlines | 12% | 15% | China Southern | 11% | 14% |
| 12 (12) | Macau | 3.2 | 12% | 15% | Air Macau | 62% | 11% | Xiamen AL | 13% | 22% | China Eastern | 8% | 47% |
| 13 (16) | Canada | 3.2 | 17% | 25% | Air Canada | 41% | 10% | China Eastern | 19% | 20% | Air China | 14% | 10% |
| 14 (10) | UAE | 3.1 | 7% | 6% | Emirates | 56% | 5% | Etihad | 19% | 26% | China Southern | 11% | 4% |
| 15 (9) | Germany | 2.9 | 6% | 7% | Lufthansa | 49% | 4% | Air China | 38% | 7% | China Eastern | 6% | 0% |
| 16 (20) | Indonesia | 2.7 | 24% | 27% | Garuda | 36% | 18% | Xiamen AL | 15% | ∞ | Lion | 15% | ∞ |
| 17 (18) | Philippines | 2.5 | 17% | 26% | Philippine AL | 27% | 9% | Xiamen AL | 20% | 133% | China Southern | 14% | 6% |
| 18 (13) | France | 2.4 | 9% | 13% | Air France | 48% | 5% | Air China | 23% | 16% | China Eastern | 19% | 12% |
| 19 (24) | Cambodia | 2.0 | 29% | 23% | China Southern | 29% | 18% | China Eastern | 18% | 36% | Angkor Air | 16% | ∞ |
| 20 (19) | UK | 1.7 | 11% | 22% | BA | 26% | 5% | Air China | 24% | 12% | China Southern | 14% | ∞ |
| 21 (17) | Netherlands | 1.3 | 5% | 13% | KLM | 61% | 2% | China Southern | 26% | 7% | China Eastern | 7% | ∞ |
| 22 (22) | Qatar | 1.2 | 14% | ∞ | Qatar | 100% | 14% | ||||||
| 23 (32) | New Zealand | 1.1 | 32% | ∞ | China Southern | 35% | ∞ | ANZ | 21% | 6% | China Eastern | 15% | ∞ |
| 24 (29) | Myanmar | 1.0 | 26% | 25% | China Eastern | 38% | 23% | Air China | 16% | 12% | Hebei AL | 12% | ∞ |
| 25 (25) | Italy | 1.0 | 18% | 16% | Air China | 52% | 7% | China Eastern | 17% | ∞ | Hainan | 13% | ∞ |
| 26 (21) | India | 1.0 | 9% | 14% | China Eastern | 31% | 10% | China Southern | 25% | 16% | Air China | 24% | 13% |
| 27 (--) | Ethiopia | 0.9 | na | na | Ethiopian | 100% | ∞ | ||||||
| 28 (26) | Turkey | 0.8 | 14% | ∞ | THY | 97% | 14% | China Southern | 2% | ∞ | |||
| 29 (23) | Finland | 0.6 | 7% | ∞ | Finnair | 100% | 7% | ||||||
| 30 (27) | Kazakhstan | 0.6 | 10% | 6% | Air Astana | 63% | 12% | China Southern | 23% | 2% | Hainan | 6% | 19% |
Note: area of bubbles directly related to total seat capacity 2017.
