China Eastern Airlines is teaming up with Chinese e-commerce giant Alibaba, hoping to cash in on an online shopping frenzy to boost ticket sales.
Shanghai-based China Eastern has struggled in a market plagued by surging fuel costs, volatile travel trends and ever intensifying competition. In the cutthroat world of Chinese air travel, any advantage can help.
Under the alliance announced Tuesday, China Eastern will set up an online ticket store on Alibaba’s retail Web site, Taobao.com. Alibaba will in turn provide payment services for China Eastern’s ticket sales via its Alipay system.
“Direct online ticket sales are economical and convenient,” said Ma Xulun, China Eastern’s general manager. “Through e-commerce, China Eastern aims to improve its ratio of direct ticket sales and thereby its competitive advantage in the marketplace,” he said.
Alibaba’s online retail marketplace, Taobao, has flourished despite the economic downturn, linking businesses eager to unload inventory and reach new customers with shoppers drawn by its convenience and wide array of merchandise.
Jack Ma, the entrepreneur founder of Alibaba, said he was excited to be helping contribute to the “revival” of China Eastern.
After a slow start thanks to China’s cumbersome banking system and a general lack of experience with consumer credit, online shopping has taken off, helped by advances in online security and payment systems.
Ma’s success in foreseeing the demand for business-to-business and business-to-consumer e-commerce in an increasingly outsourced world has made him a celebrity millionaire.
Online retail sales totaled 6 billion yuan ($887 million) in the third quarter of this year, up by a third from the quarter before and up 171 percent from the same period of last year, according to China technology and media consultant Analysys International.
Though consumer electronics and household items comprise most online sales, dozens of travel agents also offer their services on Taobao, where customers use instant message chatting to barter over prices and seal deals in minutes. Prices can be up to 80 percent cheaper than tickets bought directly from the airlines.
But Taobao’s cachet could help China Eastern drastically boost sales, says Cao Fei, a senior analyst at Analysys in Beijing.
“This is a very innovative step for China Eastern, stepping into the online business,” Cao said.
“People now really like to shop online, from very cheap stuff to even luxury goods. It has become a lifestyle, or a very smart way to get reasonable prices,” he said.
For Ren Huayi, a human resources staffer at a Shanghai ad company, shopping for airline tickets online is well worth dealing with what she feels is a somewhat overwhelming array of choices.
“It’s just like a ticket supermarket,” Ren said. “It saves me a lot of trouble and energy figuring out different package prices with different flight routes offered by different airlines.”
As of October, Taobao’s registered users had more than doubled from the year before to 159 million. The company reported 80.9 billion yuan (nearly $12 billion) in sales in the first half of this year, a 97 percent year-on-year increase.
For China Eastern, long burdened by its huge dollar-denominated debts, the tie-up could mean higher ticket sales with little extra investment, Cao said.