AirAsia and other regional budget airlines will face a new powerful competitor when China Eastern Airlines Company Ltd, one of the world’s Top 10 airline groups, expands its budget air travel to the Asian region outside China.
China Eastern, listed on the stock exchanges of New York, Shanghai and Hong Kong, now wants its low-cost carrier China United Airlines to expand beyond China.
Currently, Beijing-based China United operates domestic routes with 49 aircraft. It operates scheduled flights and charter services out of the Beijing Nanyuan Airport.
“We see the future of low-cost travel (LCT) as very promising. In 2014, we entered this segment, and now under the Belt and Road Initiative (BRI) policy, we want to expand our budget air travel to South-East Asia, South Korea and Japan,” said executive vice-president Xi Sheng at China Eastern’s headquarters here recently.
Under the BRI of President Xi Jinping, Chinese state-controlled airlines such as China Eastern are expected to spread their wings to BRI nations to develop the so-called “Aviation Silk Road”.
“Within three to five years, China United will have about 80 aircraft to cover new destinations outside China,” Xi added in reply to questions from StarBiz when he met with a group of foreign journalists from 17 BRI member countries.
Star Media Group represented Malaysia to attend a three-week fellowship programme hosted by the airline, China Daily, University of International Business and Economics and Shanghai International Studies University.
Xi said China United would provide an alternative to current players in the LCT segment, including AirAsia.
“AirAsia has grabbed a large LCT market share in China. We cannot be a threat to AirAsia, but we will be a new player providing an alternative to existing players.
“When we enter South-East Asia, we will compete with current players on services and cost. But fundamentally, safety will come first,” said Xi, without mentioning when China Eastern would launch its international LCT business.
The China Eastern spokesperson said when the new Daxing Airport in Beijing opens for business in September, “new and big opportunities” would open up for China Eastern that also owns Shanghai Airlines – another full-service airline in China.
“This new airport is very important for the further development of our full-service and LCT businesses. It will provide a new platform for us to expand our domestic and international routes,” he said.
Touted to be the biggest airport in the world with separate areas for domestic and international flights, the 80-billion-yuan (RM48bil) Daxing Airport – about 19km from Beijing city centre – will be able to receive 100 million passengers a year.
With the further opening up of China to foreign investments, Xi sees civil aviation as the most rapidly growing service sector.
“Though we were set up in 1957, rapid growth and development only took place in recent years after China’s further opening up, greater emphasis on globalisation and reforms, as well as the launch of the BRI.
“As one of the top airlines in the world with a fleet of 720 aircraft operating 3,000 flights daily, the future of China Eastern is bright,” said Xi, backed by a screen of updated data and information behind him.
In its regional expansion plan, China Eastern would also be looking for strategic cooperation, joint ventures and equity investment. It has close cooperation with Japan Airlines and Qantas.
“We hope to get new partners of cooperation along the BRI countries, in accordance with President Xi’s vision of shared prosperity with the world,” said the airline’s Xi, in response to questions.
But Malaysia Airlines, which is facing an uncertain fate due to its massive losses and reportedly looking for buyers, is not on the radar of China Eastern.
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“Many years ago, I flew on Malaysia Airlines. I felt good… it’s a pity the airline has been trapped in difficulties. But at the moment, it is not on our equity agenda,” added Xi in response to questions from StarBiz.
According to Xinhua News, China Eastern posted a total revenue of 114.93 billion yuan (RM69bil) in 2018, up 13% year-on-year.
The net profit of China’s second-largest airline group stood at 2.71 billion yuan (RM1.63bil), down 57% from the previous year. The company cited rising oil prices and foreign exchange losses as causes of its profit plunge.
It carried 121.2 million passengers last year.