The Bottom Line.
In this Insight, Eléonore William analyzes Chinese Globalized groups by looking at the China Eastern airline company. Diversification of services, strengthening of international alliances, and development opportunities in a context of increased competition, this brief note gives a practical overview of a usually unexplored industry.
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Globalized Chinese groups China Eastern spreads its wings
[By Eléonore William]
China Eastern Air Holding Company is one of China’s three largest air transport groups. Created in 1957 by the Shanghai Civil Aviation Administration, the group is based in Shanghai.
China Eastern currently operates a fleet of nearly 800 aircraft with an average age of less than six years and therefore has one of the youngest fleets of the world’s major airlines. The group carries more than 100 million passengers each year, placing it in 8th place in 2017, neck and neck with China Southern Airlines in terms of passenger-kilometers revenue. The group currently serves 257 destinations in 35 countries.
Like the other two main Chinese airlines, Air China and China Southern, China Eastern is a public group, in which the Chinese government owns 61%. However, China Eastern is the first Chinese airline to have some of its shares listed on the New York, Hong Kong and Shanghai stock exchanges since 1997.
Diversification of services.
The group has gradually established itself as a major player in the air transport of passengers and cargo, both in China and internationally, by strengthening its offer with a wide range of companies. China Eastern operates in the fields of air catering, import-export, advertising services and industrial investments.
>> Related Reading: Air transport as a lever of internationalization for China.
Strengthening of international alliances.
In 2000, China Eastern began its collaboration with Air France in the form of code-sharing on the Paris-Shanghai route. This partnership was consolidated in 2012 with a joint venture agreement, which KLM joined in 2016, thereby extending the agreement to the Amsterdam-Shanghai route. In 2018, two additional roads were furthermore opened between Paris and Wuhan and Kunming.
These partnerships have taken on a new dimension because they include maintenance, training and industrial development support issues. They are also more long-term, since China Eastern’s has acquired 8.8% stake in Air France-KLM in 2017. Delta Airlines’ stake in China Eastern also reach 3.55 percent of the company’s capital.
China Eastern’s ambition is to expand internationally and become one of the world’s leading airlines. With this in mind, in 2011 it joined the Skyteam network, an international airline alliance that brings together 19 airlines worldwide, including Air France, KLM and Delta Airlines.
Development opportunities in a context of increased competition.
The expected opening of a second international airport in Beijing (Daxing) at the end of 2019 and the development of the Chinese air sector have led the Chinese Civil Aviation Administration to change regulations, in particular the so-called “one link, one airline” rule, introduced in 2009 to limit excessive competition between state-owned companies, particularly on routes on which demand was low.
Since October 2018, the development of air routes to Australia, Thailand and the United States, which have a partial open skies agreement with China, should be possible and allow more Chinese competition.
While Air China has so far dominated the long-haul market from Beijing Capital Airport, the opening of this new airport opens up new opportunities for China Eastern, designated as one of the airport’s anchor operators, in which it plans to have two hundred positions.
This insight was originally published in French in « La Lettre de la Chine Hors Les Murs » N°27, January 2019, by the French External Trade Advisors (Comite National des Conseillers du Commerce Exterieur).
Eleonore William | China Expert Contributor
Expert in China – France economic relations, Eleonore William is Head of Communication and Studies at the France China Committee, a major actor in the Franco-Chinese economic relation, gathering French enterprises active with China in the long-term.
Former Manager of the technical cooperation with China and with Sub-saharan Africa for the French ministries of Economy and Finance, Eleonore William has a 15 years experience as a specialist in business development, institutional and international relations and as an observer and analyst of China political and economic evolutions.
Disclaimer: The views expressed are those of their author(s) only and do not reflect those of The Asia-Pacific Circle or of its editors unless otherwise stated.
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