China’s government is continuing to ease restrictions on where local carriers may set up secondary bases as it allows for more competition in the fast-growing market.
The regulatory Civil Aviation Administration of China (CAAC) has traditionally been strict in barring airlines not based in one of the three main hubs of Beijing, Guangzhou or Shanghai from setting up bases in other cities. In recent years it has been progressively easing its policies, however, and both Hainan Airlines and Shanghai Airlines now have, for example, subsidiaries in Beijing. Hainan also recently established a base in Guangzhou.
Now Guangzhou-based China Southern Airlines, facing more competition at its home base, has secured CAAC approval to start basing aircraft in Beijing, where flag carrier Air China is located. It says it recently set up a Beijing branch and plans to start basing widebody aircraft there in the coming months, in line with plans to eventually operate medium- and long-haul international services from the Chinese capital. “With the establishment of the Guangzhou and Beijing hubs, the group’s strategic transition from a city-pair operation model to a hubbing network operation model will be facilitated, which will in turn position the group to better explore and seize the opportunities that the 2008 Beijing Olympic Games will bring to the aviation market,” says China Southern.
China Southern said in December that it planned to spend around $134 million in the coming years to upgrade its Beijing Capital International airport operations and that this would include money for facilities to handle Airbus A380s and Boeing 787s. It has both aircraft types on order, with A380s due for delivery from 2007 and 787s from mid-2008.
The carrier already operates its own terminal at Beijing’s main airport, but it is for domestic operations and has limited international services. Operating medium- and long-haul international services from Beijing will put it into direct competition with Air China, but allowing for more head-to-head competition is something the CAAC has indicated it will permit on a controlled basis. In addition to letting existing carriers set up bases in other cities it has permitted the establishment of new airlines with private-sector ownership.
China Southern currently operates more than 40 routes linking Beijing with other cities in China and said in December that revenue from its Beijing operations should amount to 4 billion yuan ($493 million) this year, or 10% of its total business. ■
Source: Airline Business
