China Southern Airlines Co. (1055) missed a target date for introducing Airbus SAS A380s on international flights from Beijing, prolonging a more than yearlong struggle to gain access to slots in the nation’s capital.
The carrier expected to start flying A380s to Paris from Beijing last month, it said in August. That was pending final agreement about plans to cooperate on the route with Air China Ltd. (753), the biggest airline in the Chinese capital. China Southern’s media department and Air China’s investor-relations office both failed to reply to phone calls and e-mails from Bloomberg News seeking comment on the delay.
China Southern’s struggle to enter Beijing reflects how government policies are limiting competition between the nation’s big three state-controlled carriers on overseas routes, said Will Horton, an analyst with CAPA Centre for Aviation. The delay has left China Southern mainly flying its four 506-seat A380s on domestic routes from its home in Guangzhou, a smaller city with less traffic than Beijing.
“In almost no other market could this have occurred,” Horton said. “It is head-scratching and alludes to how Chinese aviation still needs major development to catch up with the rest of the world.”
Air China has a lock on Beijing routes because of the aviation landscape established by the Civil Aviation Administration of China, the industry regulator, according to Li Yanhua, a professor at Tianjin-based Civil Aviation University of China. China Eastern Airlines Corp. (670) similarly controls Shanghai, China’s financial capital, while China Southern has Guangzhou.
“The regulator doesn’t favor direct or major competition among domestic players on key routes,” she said. “If China Southern gets the right to fly Beijing-Paris directly, it will be a blow to Air China.”
Calls to the media department of Civil Aviation Administration of China went unanswered. Air China is the nation’s biggest international carrier. China Southern is the biggest on domestic routes and the largest in Asia by passenger numbers.
The lack of domestic competition for Air China means that Air France-KLM is the only other carrier operating direct Beijing-Paris flights. The two airlines offered about 14,203 seats on the route in the week ended Sept. 30, making it the fourth biggest by capacity between China and Europe, according to CAPA.
The parent of Hainan Airlines Co. (900945), China’s fourth biggest carrier, has found a way round China’s unwritten ‘one airline, one route,’ which has also limited its expansion in the nation’s biggest cities. HNA Group Co. last month bought a 48 percent stake in French airline Aigle Azur Transports Aeriens SAS. This carrier will eventually begin Beijing-Paris flights, using a French rather than Chinese license.
Since China Southern received its first A380 in October 2011 it has mainly used the planes on the about 1,900-kilometer (1,180 miles) flights between Beijing and Guangzhou that take about three hours. The aircraft are designed to fly as far as 15,400 kilometers. The carrier did begin A380 flights to Los Angeles from Guangzhou last month, its first overseas superjumbo route.
The airline probably lost as much as 100 million yuan ($16 million) on its A380 operations in the first half, according to Citigroup Inc. It’s due to receive its fifth and final superjumbo early next year. The carrier’s net income fell 29 percent in the third quarter on currency fluctuations, after slumping 85 percent in the first half.
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