China Southern Airlines' UK office overlooks capacity-constrained London Heathrow airport, where efforts to build a third runway are still years away from fruition.
The difference in its home market could not be more stark. A huge terminal has just opened at its Guangzhou Baiyun International airport hub, while Beijing Daxing International airport – the capital city's second facility – is set to open towards the end of next year.
Both are central to China Southern's growth plans, explains Jian Zhang, the carrier's UK general manager.
"Our target is to handle 40% of the passenger traffic at the new [Beijing] airport, and we are going to deploy more than 200 aircraft [there] by 2025," he says of the facility, which is to have a capacity of 72 million passengers in its first phase.
"Beijing has always been a very hard aviation market, where airlines are competing fairly for big market share," Zhang says. "If you can operate at Beijing airport, you can earn a lot of money because the traffic is huge."
China Southern uses 787s on daily services between Guangzhou and London
Boeing
Under current plans, Air China will anchor the old airport, which is currently handling passenger numbers way beyond its 82 million capacity, while China Southern and China Eastern Airlines will be the main players at Daxing.
"We are planning to launch more new long-haul routes from the new Beijing airport," Zhang says. That includes "more flights to Europe and America".
NEW SUBSIDIARY
The carrier has already set up a subsidiary to operate from the airport – China Southern Airline Xiongan was founded earlier this year.
Amid growth in Beijing and elsewhere, Zhang adds that the China Southern group's fleet is currently more than 800 aircraft, "but our target is [that] by 2020, the number is increased to 1,000", he says.
In becoming a major player at Daxing, the airline's future strategy will be based on a two-hub operation, along the same lines as some US majors. China Southern's current hub in the southern Chinese city of Guangzhou is the other side of that equation, and Baiyun airport's new Terminal 2 is central to its plans.
"It is the largest terminal as a single building in China – it is huge," Zhang notes.
Last year, Guangzhou Baiyun handled 65.8 million passengers, well above its design capacity of 40 million, and throughput is forecast to hit 70 million this year. The new terminal, which opened earlier this year, has an annual design capacity of 45 million.
China Southern is "taking advantage of Terminal 2 to enhance our ground service in an all-round manner", says Zhang.
"We completed an in-depth study on the transfer procedures, the layout of service counters, and the location of luggage and the placement of self-service equipment," he explains. "What we're trying to do is provide the most efficient and convenient service to the passenger."
Such an approach is crucial, he notes, in strengthening China Southern's appeal to passengers who use Guangzhou for connecting flights.
"Terminal 2 can strengthen our transfer performance," Zhang says, citing the use of Guangzhou as a hub to connect Europe to Australia and Southeast Asia.
The size of the prize is significant.
"We look at the whole traffic from Europe to Australia and New Zealand, and we are quite small. After six years running, we've only got around 3% of that traffic, so I can say we can do better and we can explore more traffic."
HUB COMPETITION
Asked whether such expansion plans put Guangzhou in direct competition with nearby hub Hong Kong International airport, Zhang acknowledges some overlap in connecting traffic and that Cathay Pacific is a rival on some services, but adds that the two facilities have different catchment areas.
"[Guangzhou's] local traffic is stronger than Hong Kong's, because the population [around the city] is huge and we also have some other traffic in the whole of the Guangdong province that we can attract, because the high-speed train is convenient, the bus and the motorway are convenient."
Indeed, on the domestic front, the high-speed train is a far more significant competitor to China Southern, Zhang suggests. "So that's why we deploy more international long-haul routes," he says.
As part of its Western Europe expansion, China Southern's UK operation sits alongside services to Amsterdam, Paris, Frankfurt and, recently, Rome. The Dutch and French hubs are respectively home to China Southern's SkyTeam partners KLM and Air France, bringing plenty of connecting opportunities.
London is not a SkyTeam hub, but "we do have some codeshares with British Airways", to five domestic UK destinations, Zhang says.
On top of a daily Guangzhou-Heathrow route, China Southern has recently launched services to Heathrow from Wuhan and flights to Heathrow from Sanya – a "tourist only" route pitched at UK travellers. It also operates a cargo route to London Stansted airport.
"In the future, we will really make the UK market our priority," says Zhang.
Looking at growth opportunities, Zhang takes heart from the strong passenger mix on the carrier's Guangzhou-London route, which "is around 30% for point-to-point, 30% for domestic transfer; the last 40% is international transfer, especially to Australia and New Zealand".
He says this passenger mix puts China Southern in a strong position regarding yield pressures because a fall in fares for one passenger type can be offset elsewhere.
Amid these ambitions to add more UK connections, the country's likely departure from the EU looms large. But Zhang sees Brexit as a potential opportunity for China Southern: "I believe we are both looking for more opportunity, more business co-operation with each other. If the governments make a bilateral deal that brings more business and tourism traffic, it should be an opportunity [for China Southern] to provide more traffic."
SECONDARY CHALLENGE
UK-China connectivity has not always been plain sailing in recent years, however. China Southern itself flirted with twice-daily Heathrow-Guangzhou flights for a few months, but reverted back to daily services earlier this year. This freed up the capacity to introduce services to Wuhan and Sanya a few months ago.
Meanwhile, British Airways ended its Chengdu service in early 2017, describing it as "not commercially viable". Air China has since introduced a thrice-weekly Chengdu-London Gatwick service, but such routes to secondary facilities are still far from proven performers.
Zhang notes that key drivers of success at secondary airports will be the network beyond the Chinese city and the relative wealth of the local population.
"If you are going to operate long haul, you need to consider your network support," Zhang points out. "As to the point-to-point traffic, especially for secondary cities, it [might not] be enough. The population is huge, but [you] cannot only focus on the population, you have to consider the purchasing power.
"As to Chengdu, I guess the average income of the citizens is not so high... That is why we try our best to build our international network – we can support each other."
He cites the examples of Cairns and Adelaide within China Southern's network, where the local populations are not high, but "we can transfer the traffic all around the world at our Guangzhou hub, which supports the route".
Factor in China Southern's growing fleet – at a time of shiny new infrastructure plus an increasingly travel-hungry public in the home market – and the picture of emerges of an airline determined to claim a bigger slice of international traffic.
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Source: Cirium Dashboard
