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Air China Aims To Narrow Gap With Cathay

Air China working on over 100 service improvements to stay competitive

Jul 08, 2010

Air China Ltd., the nation’s largest international carrier, said it’s working on more than 100 service improvements as it competes with Cathay Pacific Airways Ltd. and Delta Air Lines Inc. on overseas routes.

Targets include onboard catering, seat comfort, inflight entertainment, call-centre operations, maintenance and cleaning, Senior Vice President He Li said yesterday in an interview in Beijing. The airline is also deploying a mobile-phone text messaging system, he said.

“This year we want to focus on improving services,” He said. “We couldn’t do it during the financial crisis as then we were tied up with just avoiding losses.”

Air China’s plans may help it win more sales in the nation’s international air-travel market, which the industry regulator expects to surpass 50 million passengers a year by 2015. The improvements may also help the carrier boost first and business-class traffic on domestic routes as the government liberalizes pricing rules.

“There’s clearly still some difference in the service quality between China’s airlines and international ones,” said Zhang Jing, an analyst at Philip Securities (HK) Ltd. in Shanghai. “The verdict remains open if the new fare rules will result in better inflight services.”

Air China, China Southern Airlines Co. and China Eastern Airlines Corp., the nation’s big three carriers, all have three- star ratings from London-based Skytrax, a research company. Delta, the world’s biggest carrier, also has three stars. Cathay Pacific and Singapore Airlines Ltd. have five stars, the highest ranking.

Cargo Venture

He also said that Beijing-based Air China expects to win regulatory approval for the sale of a 49 percent stake in its cargo unit to affiliate Cathay Pacific. Operations under the new structure may begin in the second half of the year, He said.

“The market share for Chinese airliners in cargo is always going down,” he said. “We want to change this.”

Cathay Pacific, Hong Kong’s largest carrier, will inject four Boeing Co. 747-400 freighters into the unit as part of the 1.7 billion yuan ($250 million) deal announced in February.

Separate discussions have also taken place on combining the air-freight operations of China’s big three carriers in a bid to help bolster operations, He said.

“There is no consensus yet whether that is feasible and if it can achieve its objective,” he said. He didn’t elaborate.

Premium Pricing

Air China expects a “modest increase” in the percentage of domestic revenue from premium-class seats this year, from less than 10 percent last year, He said, on rebounding demand and the new fare rules. Under the new pricing structure, which started this month, airlines no longer need to set premium fares at a fixed percentage above economy-class ticket prices.

“It’s possible fares are more likely to be higher than before, but you have got to take into consideration our extra costs in the two classes,” He said. “Passengers flying first and business-class also aren’t as sensitive to prices.”

Air China plans to expand total capacity 12 percent this year as it adds new planes and a rebounding global economy revives international travel, it said in April. The carrier expects to receive 33 new planes this year and next, it said.

The airline flew 18.3 million passengers in the first five months of the year, a 16 percent increase from a year earlier. Last year, annual passenger numbers rose 14 percent to 41.3 million.

Nationwide passenger numbers may more than double to 700 million a year by 2020 from an expected 266 million this year, Liu Shaocheng, director of policy research at the Civil Aviation Administration of China, said yesterday at a conference in Beijing.

Air China working on over 100 service improvements to stay competitive
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