Rise of the second-tier city

Updated 2017-10-27 11:02:55 Global Times

Hainan among major airlines opening more routes

In less than a week, Hainan Airlines, China's fourth largest carrier in terms of fleet size, is due to officially launch two international flights to North America, the latest example of its efforts to expand operations from second-tier cities to the continent.

The first flight, from Southwest China's Chongqing Municipality to New York City, made its maiden flight on October 20. Following this, the second flight, from Chengdu, capital of Southwest China's Sichuan Province to New York City, made its maiden flight on Thursday.

The first flight, which will fly twice per week, is the second route departing from Chongqing to North America operated by Hainan Airlines. Meanwhile, the second flight, which also will fly twice per week, is the second route departing from Chengdu to the U.S. also operated by the carrier.

The two flights are the carrier's 13th and 14th nonstop trans-Pacific routes.

Chongqing and Chengdu, both located in Southwest China, are now regarded as the economic engines of the country's southwestern region.

Intercontinental expansion

Over the last three years, Hainan Airlines has opened on average three new routes annually. The expansion pace is rarely seen among its competitors. Currently, it is the airline operating the most routes from China to North America.

But Hainan Airlines is not alone in its mission to expand in second-tier cities and other continents.

Shanghai-based China Eastern Airlines has also been conducting nonstop international routes from second-tier cities such as Qingdao, East China's Shandong Province, Nanjing, capital of East China's Jiangsu Province and Hangzhou, capital of East China's Zhejiang Province to North America and Australia.

Furthermore, China Southern Airlines based in Guangzhou, capital of South China's Guangdong Province, said in its 2016 fiscal report that the carrier has opened more international routes from second-tier cities such as Xiamen in East China's Fujian Province, Shenzhen in Guangdong Province and Wuhan, capital of Central China's Hubei Province.

The carriers are also busy introducing the Boeing 787 series and the A350, aircraft which are fit for long-haul flights. Particularly, China Eastern said it plans to adopt 10 Boeing 787s and five A350s by the end of 2019.

Reasons behind intercontinental expansion in second-tier cities are obvious.

For one thing, the increasing number of air routes from China to North America is closely related to the change in visa policies - 10-year visas offered to Chinese by the U.S. and Canada have changed things up in the aviation market.

In a note sent to the Global Times on Wednesday, Hainan Airlines said the reason behind the growing rates of operations in second-tier cities is because it is hard to win flight schedules in first-tier cities such as Beijing, Shanghai and Guangzhou. But as local economies are constantly developing, smaller cities have met the requirements to host cross-continental routes.

The note also said there are some factors the carrier needs to consider before opening more routes from second-tier cities, such as the local economic development of the cities, the number of Chinese and overseas students hosted, the amount of business communications with cities overseas, a city's social security as well as rival's performances, ticket prices and passenger flow.

Data from the Civil Aviation Administration of China showed that the Chinese airlines have transported 263 million passengers in the first half of this year, including 26.7 million passengers for international routes, a year-on-year growth of 6.1 percent.

Future opportunities

Data from Civil Aviation Data Analysis (CADAS) showed that Chicago-headquartered United Airlines, Beijing-headquartered Air China and Shanghai-based China Eastern were the top three global carriers operating China-U.S. routes in 2016, with a collective 50 percent market share for such routes, followed by Hainan Airlines, which singlehandedly holds 13.8 percent.

In September, Hainan Airlines said it would cut frequencies from Beijing and Shanghai to North America for the new season.

"There are more subsidies for the carrier's newly-opened routes in second-tier cities," Luo Zhiyu, an analyst at CADAS, told the Global Times on Wednesday, adding he is taking a wait-and-see attitude toward the performance of Hainan Airlines in its North American market due to the lower load factor in the low season.

However, the airline said it has not ruled out possibilities of opening more routes if it could gain more traffic rights in the U.S. and Canada.

As for its North American strategy, the carrier said it will be based on the routes departing from Beijing. It will also look for opportunities in Shanghai in a bid to increase its shares in the overseas market.

Also, it will maintain the strategy of flying more routes from second-tier cities to North America, helping to expand in the central and southern parts of the U.S. and even Canada.

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