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Airlines - China - September 2013

Published By :

Mintel

Published Date : Oct 2013

Category :

Airports

No. of Pages : 176 Pages


China represents a market with both big opportunities and challenges for the airline business. As growth and competition increase at the same time, airlines need to react by being more customer-oriented in terms of service, marketing as well as product design.
TABLE OF CONTENT

Introduction
Definition
Report structure
Methodology
Abbreviations

Executive Summary
The market
Market size and forecast
Figure 1: Forecast of total airline market volume, by passenger numbers, China, 2008-18
Market segment
Figure 2: Air passenger volume and share, by segment, China, 2008-18
Key trends
Growth drivers and barriers
Companies and brands
Figure 3: Airline company brand share, by passenger volume, China, 2010-12
The consumer
Reasons for flying
Figure 4: Reason for air travel in the past 12 months, June 2013
Choice of airline and class
Figure 5: Choice of airline, by purpose for travelling, June 2013
Figure 6: Choice of class, by purpose of travelling, June 2013
Important consideration factors
Figure 7: Important consideration factors for selecting an airline, June 2013
Attitudes towards airline travelling
Figure 8: Attitudes towards airline travel, June 2013
Perceptions of major domestic airlines
Figure 9: Brand correspondence map of perception of major airlines, June 2013
Value-added services
Figure 10: Most wanted value-added services on domestic and international flights, June 2013
Key issues
Introducing more value-added services to economy flyers can offset slow pick-up in premium travellers
Greater competition urges Chinese airlines to drive quality of service and be more customer-oriented
Making low-cost carriers more attractive by sophisticated marketing and product design
Figure 11: easyJet advertising, UK 2013
What we think

The Market
Key points
China becomes world’s second-largest airline market by passenger volume
Figure 12: Air passengers, China vs. global, 2008-13
Mainland domestic flights dominate passenger volume, while HK, MC, TW and international sectors grew faster since 2010
Figure 13: Passenger volume and % share, by segment, China 2008-13
Figure 14: Year-on-year growth rate of domestic and international air traffic volume, China 2008-13
Foreign airlines increase presence in China’s secondary cities
Figure 15: Number of flight routes, China, 2010-12
HK, MC, TW routes enjoy the highest yield per RPK
Figure 16: Average yield per RPK, by market segment, 2010-12
Greater growth of air travel in secondary cities from Northern, Central and Western regions
Figure 17: Air passenger volume and growth of China’s airports with a passenger volume over 10 million, 2012
Market drivers
Steady economy growth
Figure 18: GDP and air passenger volume, China, 2005-12
Greater economic integration with the world
Rising income fuels demand for leisure travel
Figure 19: Number of domestic and international tourist visitors, China, 2007-12
Figure 20: Holidays taken by middle class in the past 12 months, China, April 2012
Relaxed visa requirements and favourable exchange rates boost international outbound travel
Figure 21: Top 20 outbound travel destinations, by tourist volume, China, 2011
Government support on infrastructure development, plan to grow regional aviation and low-cost carriers
Growth barriers
Direct competition from high-speed rail
Figure 22: High-speed rail 4+4 grid planned to be completed by 2020, China, 2013
Flight delay issues deteriorated under air space constraint
Fluctuating seasonal demand associated with lack of annual leave
Pilots become a scarce resource
Monopolistic jet fuel supply
Economic uncertainty and emergent incidence could weaken demand
The forecast
Figure 23: Forecast of total airline market volume, by passenger number, China, 2008-18
Figure 24: Forecast of airline passenger volume, by mainland segment, China, 2008-18
Figure 25: Forecast of airline passenger volume by HK, MC, TW segment, China, 2008-18
Figure 26: Forecast of airline passenger volume, by international segment, China, 2008-18

Companies
Key points
Company share by passenger volume
Figure 27: Airline company brand share, by passenger volume, China, 2010-12
China Southern Airlines
Air China
China Eastern Airlines
HNA Group
Hainan Airlines
West Air
Spring Airlines
Juneyao Air
Cathay Pacific

The Consumer – Reasons for Flying
Key points
Nearly four in five have taken a flight over past 12 months
Figure 28: Reason for air travel in the past 12 months, June 2013
More men travel for business, while women in their thirties travel most on international flights for leisure
Figure 29: Reason for flying, by gender and age, June 2013
Figure 30: Flying for leisure, by gender and age, June 2013
Significantly more leisure air travel once income hits RMB8,000 for domestic sector and RMB12,000 for international sector
Figure 31: Flying for leisure, by household income, June 2013
Figure 32: Reason for flying, by city, June 2013

The Consumer – Choice of Airline and Class
Key points
A third have flown premium economy
Figure 33: Choice of class, June 2013
Figure 34: Choice of class, by city, June 2013
Low-cost carriers attract more leisure travellers
Figure 35: Choice of full-service vs. low-cost airlines, June 2013
Figure 36: Choice of low-cost airlines, by demographics, June 2013

The Consumer – Important Consideration Factors
Key points
Safety, convenient flight time and price are top three factors
Figure 37: Important consideration factors for selecting an airline, June 2013
Budget-driven domestic leisure flyers vs. quality-seeking international business flyers
Figure 38: Important consideration factors for selecting an airline, by types of travel, June 2013
Figure 39: Important consideration factors for selecting an airline, by first/business and economy class travellers, June 2013

The Consumer – Attitudes Towards Airline Travelling
Key points
Three in five like more price promotions, but less than 30% think low-cost carriers offer attractive price structure
Figure 40: Attitudes towards flight promotions, by demographics, June 2013
Figure 41: Attitudes towards low-cost airlines, by demographics, June 2013
Figure 42: Attitudes towards air travelling, June 2013
Half of flyers want airlines to do more to shorten waiting times
Figure 43: Attitudes towards airline travelling, by reason for flying, June 2013
Business flyers on international routes most willing to upgrade
Figure 44: Attitudes towards service upgrade, by types of flyers, June 2013
Figure 45: Attitudes towards air travelling, by class of flyers, June 2013
Huge demand for domestic flights during New Year and public holidays
Figure 46: Attitudes towards operation during peak seasons, by demographics, June 2013
Figure 47: Attitudes towards air travelling, June 2013
International airlines are preferred by a third of flyers on international flights
Figure 48: Attitudes towards international airlines, by reasons for flying, June 2013
Figure 49: Attitudes towards international airlines, by flying class, June 2013
Figure 50: Attitudes towards airline reviews, by flying purpose and flying class, June 2013

The Consumer – Perceptions of Major Domestic Airlines
Key points
Figure 51: Brand correspondence map of perception of major airlines, June 2013
Figure 52: Rating difference: all international flyers vs. domestic flyers on major airlines in China, by reason for flying, June 2013

The Consumer – Value-added Services
Key points
Food and drink ranks top as optional extra for domestic flights
Figure 53: Value-added services, domestic flights, June 2013
Seating comfort and extra baggage allowance rank top as optional extra for international flights
Figure 54: Value-added services, international flights, June 2013
Men are more interested in onboard entertainment while women like more luggage allowance
Figure 55: Value-added services, international flights, by gender, June 2013

Key Issue – Introducing More Value-added Services to Economy Flyers can Offset Slow Pick-up in Premium Travellers
Key points
Despite increasing passenger volume and asset utilisation, airlines are making fewer profits
Figure 56: Airline revenue, net profit, and passenger number, global, 2007-12
Figure 57: Average operating cost structure of airline companies, China 2013
Relying on first/business class revenue makes airlines more vulnerable in difficult times
Figure 58: Schematic representation of revenue impact from premium air travellers, global, 2007 and 2013
Figure 59: Passenger traffic growth, by ticket type, premium vs. economy class, global, Jan 2007-Nov 2009
More reasons for China to focus on revenue from economy flyers
85% of demand comes from short- and medium-haul routes
First/business accounts for only 10% of passenger revenue
Figure 60: Price gap among first, business and economy class tickets, China 2013
Meeting demand for value-added services can help airlines stretch revenues further
Premium economy builds success centred on price value
Figure 61: Passenger revenue and number of China Southern Airlines, 2010-12
Figure 62: Comparison of business, premium economy and economy class on China Southern Airlines, China, 2013
Figure 63: Choice of flying class, by purpose of flying, China, June 2013
Figure 64: Choice of flying class, by household income, China, June 2013
Figure 65: Important consideration factors, by household income, China, June 2013
Providing a personalised flight experience
Figure 66: Attitudes towards air travelling, by class of flyers, June 2013
Figure 67: Attitudes towards healthy lifestyle, China, November 2012
Figure 68: Cathay Pacific partners with The Langham to offer new menu, September 2013
Figure 69: Family holiday taken among middle class, China, July 2012
Figure 70: Scoot Airline’s ScootinSilence zone, September 2013
Multiple ancillary revenue activities
Figure 71: Comparison of airlines ancillary revenue and source, global, 2011
Figure 72: Attitudes towards airline travel, by household income, China June 2013
What does it mean?

Key Issue – Greater Competition Urges Chinese Airlines to Drive Quality of Service and be More Customer-oriented
Key points
‘Big Three’ lose share in all segments as competitors expand
Figure 73: Total market share of the ‘big three’ Chinese airlines, by market segment, 2010-12
Figure 74: Growth rates of total market segment and the ‘big three’ airlines, by region, 2011 and 2012
Chinese airlines expedite international expansion in different ways…
Figure 75: Fleet expansion, by major domestic airlines, China 2013
…but still have to catch up on service quality, which is valued more by high-end travellers
Figure 76: Attitudes towards international airlines, by demographics, China June 2013
Figure 77: Number of complaints made to Chinese and foreign airlines, China, January-July 2013
Compared to food, entertainment and comfort, quality of customer service matters more to Chinese flyers
Figure 78: Important consideration factors, by where, why and how people fly, China, June 2013
Management of irregular flight operations still a big weakness
Open and timely communication helps prevent an incident becoming a crisis
Figure 79: Mobile app veryzhun, China, 2013
A responsive feedback system shows a customer-oriented attitude
Figure 80: Spring Airlines’ chairman blog replying to customer feedback, China, 2009-13
Figure 81: Incidence rate of complaints, Spring Airlines vs. average level of Chinese airlines, China, January-July 2013
What does it mean?

Key Issue – Make Low-cost Carriers More Attractive by Sophisticated Marketing and Product Design
Key points
Despite strong demand for cheap air travel, China represents a challenging market for low-cost carriers
Less than 5% market share of low-cost carriers
Figure 82: Market share of low-cost carriers in North America, Europe, Asia and China, 2012
Price is important to many, but few think low-cost carriers offer attractive price structure
Figure 83: Attitudes towards price and low-cost airlines, by demographics, China June 2013
Figure 84: Passenger volume, by airline, rail, road and waterway during China’s Spring Festival, 2013
Competitive pricing by full-service airlines and development of high-speed rail erode price competitiveness of low-cost carriers
Figure 85: Comparison of cost of travelling on certain routes, China 2013
Missing elements to support low-cost carriers’ business model in China: lack of secondary airports and high tax on imported aircrafts
Improving appeal of low-cost carriers by sophisticated marketing strategies
Enhance value for money by promoting the advantages of ‘less waste’ and ‘more choice’
Figure 86: ‘Good value for money’ perception towards major airlines in China, June 2013
Figure 87: ‘Overpriced’ perception towards major airlines in China, June 2013
Use more inspirational advertising to attract short break seekers
Figure 88: Frequency of spending leisure time on short trips and long holidays in the past 12 months, China, July 2013
Figure 89: Incidence of spending leisure time on short trips and long holidays, by income, China, July 2013
Figure 90: easyJet advertising, UK 2013
Figure 91: easyJet’s in-flight magazine, UK, 2013
Integrate leisure travel services in product design
Figure 92: Choice of airlines, by purpose of travel, China June 2013
Figure 93: Domestic tourist population and per capita spending, China 2007-12
Flight and hotel packages
Figure 94: Attitudes towards airlines’ offer of packaged deals, by type of flights taken and income, China June 2013
Airport pick-up services and car rentals
Figure 95: Car ownership in China, 2000-11
What does it mean?

Appendix – Who Flies and Why? – Reason for Flying
Figure 96: Reason for flying, June 2013
Figure 97: Most popular reason for flying, by demographics, June 2013
Figure 98: Next most popular reason for flying, by demographics, June 2013
Repertoire analysis
Figure 99: Repertoire of reasons for flying, June 2013
Figure 100: Repertoire of reasons for flying, by demographics, June 2013

Appendix – Choice of Airline and Class
Figure 101: Choice of airline and class, June 2013
Figure 102: Choice of airline and class, by demographics, June 2013
Figure 103: Choice of airline and class – Any, by demographics, June 2013
Figure 104: Choice of airline and class – Domestic flight for leisure, by demographics, June 2013
Figure 105: Choice of airline and class – Domestic flight for business, by demographics, June 2013
Figure 106: Choice of airline and class – International flight for leisure, by demographics, June 2013
Figure 107: Choice of airline and class – International flight for business, by demographics, June 2013

Appendix – Important Consideration Factors
Figure 108: Important consideration factors, June 2013
Figure 109: Most important consideration factors, by demographics, June 2013
Figure 110: Next most important consideration factors, by demographics, June 2013
Figure 111: Other important consideration factors, by demographics, June 2013
Figure 112: Important consideration factors, by most popular reason for flying, June 2013
Figure 113: Important consideration factors, by next most popular reason for flying, June 2013
Figure 114: Important consideration factors, by choice of airline and class – Any, June 2013
Figure 115: Important consideration factors, by choice of airline and class – Domestic flight for leisure, June 2013
Figure 116: Important consideration factors, by choice of airline and class – Domestic flight for business, June 2013
Figure 117: Important consideration factors, by choice of airline and class – International flight for leisure, June 2013
Figure 118: Important consideration factors, by choice of airline and class – International flight for business, June 2013

Appendix – Attitudes Towards Airline Travelling
Figure 119: Attitudes towards airline travelling, June 2013
Figure 120: Most popular attitudes towards airline travelling, by demographics, June 2013
Figure 121: Next most popular attitudes towards airline travelling, by demographics, June 2013
Figure 122: Other attitudes towards airline travelling, by demographics, June 2013
Figure 123: Attitudes towards airline travelling, by most popular reason for flying, June 2013
Figure 124: Attitudes towards airline travelling, by next most popular reason for flying, June 2013
Figure 125: Attitudes towards airline travelling, by choice of airline and class – Any, June 2013
Figure 126: Attitudes towards airline travelling, by choice of airline and class – Domestic flight for leisure, June 2013
Figure 127: Attitudes towards airline travelling, by choice of airline and class – Domestic flight for business, June 2013
Figure 128: Attitudes towards airline travelling, by choice of airline and class – International flight for leisure, June 2013
Figure 129: Attitudes towards airline travelling, by choice of airline and class – International flight for business, June 2013

Appendix – Perceptions of Major Domestic Airlines
Figure 130: Perceptions of major domestic airlines, June 2013

Appendix – Value-added Services
Figure 131: Value-added services, June 2013
Figure 132: Most popular value-added services – Domestic flights (China), by demographics, June 2013
Figure 133: Next most popular value-added services – Domestic flights (China), by demographics, June 2013
Figure 134: Other value-added services – Domestic flights (China), by demographics, June 2013
Figure 135: Most popular value-added services – International flights (outside of China), by demographics, June 2013
Figure 136: Next most popular value-added services – International flights (outside of China), by demographics, June 2013
Figure 137: Other value-added services – International flights (outside of China), by demographics, June 2013

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