CAPA: Chinese airlines battle it out in Beijing

Beijing is fast becoming the most important battleground for China’s
leading airlines and they are leaving their roots behind to set up in
the capital.China Eastern has established a branch (including an
operating base) at Beijing, following in the footsteps of China Southern
and Hainan Airlines that now have a significant proportion of their
operations focused at Beijing. The moves have helped China Southern and
Hainan post good recent profits.

China decentralised its aviation industry in the early 1980s,
establishing new airlines with separate areas of influence in major
cities, to break the Beijing-centric monopoly of the CAAC. Two decades
along, the trend is for airlines to focus back on Beijing. This could
encourage the CAAC to consider liberalising other markets, in order to
encourage fresh airline activity away from the capital.

While Beijing’s rise as the focal point of Chinese aviation has
propelled it up the global airport traffic rankings, it has also been
placed under enormous operating strain.

Chronic congestion problems should ease with the opening of a new runway
later this year and the massive new terminal in Mar-07. But more
pressure on the capital is imminent, including new capacity by China
Eastern, as well as the impact of Air China’s entry into the Star
Alliance and the Olympics Games in Aug-08.

Air China is also responding to the rising competition by promising more
capacity of its own as it seeks to raise its market share to 50%. Air
China is investing over USD260 million to expand its Beijing facilities
and will move (along with its Star Alliance partners) into the new
Terminal 3 in Mar-08.