yanksn4
Posts: 1367
Joined: Wed Dec 31, 2003 10:05 am

Why Does China Need Multiple Airlines?

Sun Apr 25, 2004 11:03 pm

Hi, have you guys noticed that China has multiple airlines that operate it routes? What I am wondering is why do they need them? Why can't they just have one airline to operate its routes?
2013 Airports: EWR, JFK, LGA, LIS, AGP, DEN, GIG, RGN, BKK, LHR, FRA, LAX, SYD, PER, MEL, MCO, MIA, PEK, IAH
 
donder10
Posts: 6944
Joined: Sun Oct 21, 2001 5:29 am

RE: Why Does China Need Multiple Airlines?

Sun Apr 25, 2004 11:06 pm

Why doesn't the US do the same?
 
User avatar
LN-MOW
Posts: 1688
Joined: Tue Feb 01, 2000 12:24 am

RE: Why Does China Need Multiple Airlines?

Sun Apr 25, 2004 11:08 pm

China is a gigantic country. Why should there only be one airline? It's like saying there only should be one airline in Canada - one airline in the US - one airline in the UK - one airline in Germany ....

- I am LN-MOW, and I approve this message.
 
Celticmanx
Posts: 94
Joined: Sun Apr 01, 2001 5:06 am

RE: Why Does China Need Multiple Airlines?

Sun Apr 25, 2004 11:08 pm

Nice answer Doder10!!!

I also thought the same.
 
qr332
Posts: 2592
Joined: Tue Apr 13, 2004 11:16 pm

RE: Why Does China Need Multiple Airlines?

Sun Apr 25, 2004 11:09 pm

But aren't most of the airlines state owned and run? I would have guessed it due to the similarities in colour scheme.
"The greatest threat to knowledge is not ignorance, it is the illusion of knowledge."
 
Blackbird1331
Posts: 1740
Joined: Wed Apr 14, 2004 10:47 am

RE: Why Does China Need Multiple Airlines?

Sun Apr 25, 2004 11:18 pm

My guess is that China has to put on appearances as it attempts to become a global player in commerce. It is of no consequence which airline is more profitable, all the money is going into the same pocket.
Cameras shoot pictures. Guns shoot people. They have the guns.
 
bmi330
Posts: 1429
Joined: Sun Nov 11, 2001 9:04 am

RE: Why Does China Need Multiple Airlines?

Sun Apr 25, 2004 11:32 pm

Are all the different Chinese airlines not consolidating into just 3 different enterprises. Its most likely that having different organizations controlling different parts is easer and more manageable just like most states companies have different mangers etc for different regions.
 
carnoc
Posts: 758
Joined: Wed Oct 17, 2001 3:15 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 12:54 am

The answer is very complex to that question, but I would try to answer it as clear as I could in writing.

China needs multiple carriers due to a number of factors (sorry no time to get into details here), and although all airlines are currently state-owned, but there is no doubt that foreigners would eventually own 'a lot of' shares in some of those carriers in the near future as the nation continues to relax its foreign investment policies on civil aviation sector.

On the other hand, China has certainly consolidated a number of airlines into three nationwide international carriers, namely Air China based in Beijing, China Eastern based in Shanghai & China Southern based in Guangzhou, but please be noted that dozens of other smaller carriers won't be consolidated into BIG 3, at least not at current stage.

As a matter of fact, most of those smaller carriers are currently regional airlines, although a few have started consolidating with some other airlines which are even smaller and have been given the rights to fly to certain international destinations, but they DO NOT have the power to compete with BIG 3 at this stage anyway.

By the way, I believe anyone who has done some basic economics know that it is no good to only have one firm controls the total market, don't forget that competitions are a good thing for general public!

Best Regards.
 
Corpsnerd09
Posts: 487
Joined: Tue Mar 30, 2004 2:05 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 1:03 am

To Donder10 and Celticmanx,

China being a communist nation, there are no privately owned airlines, unlike in the U.S. So if every airline is owned by the government, why should they all fly the same routes? Since U.S. Air carriers are privately owned then it is a competition to make money. Thus, if LAX - JFK is a proftable route, many American airlines would want to make money off of it.But, if all the Chinese airlines are owned and operated by the government, wouldn't having just one of them doing one route be sufficient enough? Think of that before you start putting down America.
 
ozzie
Posts: 322
Joined: Mon Feb 23, 2004 1:43 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 1:10 am

They have a multitude of people, thus the multitude of airlines.  Smile
 
User avatar
Cadmus
Posts: 173
Joined: Thu Jan 22, 2004 6:47 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 1:28 am

if all the Chinese airlines are owned and operated by the government, wouldn't having just one of them doing one route be sufficient enough?

Chinese airlines operate in competition domestically, don't they?
Understanding is a three-edged sword
 
Lufthansa
Posts: 2303
Joined: Thu May 20, 1999 6:04 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 1:40 am

Time to do introduction to economics 101.

The chinese aren't stupid. They have abandoned the original marxist style planned economies and hence the CAAC (the Chinese equiv of aeroflot for the young ones) and you got all those many state owned Chinese carriers that we have today.

Now even though they are government owned, there is still going to be some competition result from the fact that Chinese consumers now have a choice. Remember, the nature of travel in china is much more sophisticated in its nature.... and by that I am talking about the purpose for travel and the caliber of the person doing so. Your average Chinese peasant in the country just can't afford it, but professional workers, business ppl, government officials, health professionals etc... all travel about the place on business, and the keep the Chinese economy, and much of the WORLD economy going in the process. (without them, things like those cheap blank CD's, pocket calculators, textiles, homewares, etc are just going to dry up and the world would be in a serious shortage)

Okay the point is, our travel purpose is sophisticated. So, in relative terms, the price of travel is too... I have a friend who used to work as a specialist Dr in the Beijing national hospital, and the domestic flight to Schiuan(spelling?) used to be the equivalent to a whole weeks wages, and she was paid many many times the national average. So think of it like a flight from Say Denver or Salt Lake to Los Angeles costing say, $2500 USD or more.( in economy) Get the picture....there are no flip flops on these planes.
So things like on-time performance, service, and to some extent, price come into the equation, which each company wanting to impress its owners, the state. The extent wouldn't be to that of a 100% private enterprise, but its getting there. It may surprise some of you to realise that China Southern is actually listed on the New York Stock Exchange.

From what I have heard, the catering on flights to Schiuan province, is to die for!

















[Edited 2004-04-25 18:49:11]
 
Russophile
Posts: 1304
Joined: Tue Jan 27, 2004 9:22 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 1:48 am

Fallacy : All Chinese airlines are owned by the Government

Truth: Most Chinese airlines are majority owned by the Government, but some airlines, most notably China Eastern Airlines and China Southern Airlines, do have private investors. And in fact, CEA and CSA are listed on the New York Stock Exchange

http://www.nyse.com/marketinfo/p1020656068262.html?displayPage=http%3A//www.nyse.com/cgi-bin/ny_quote%3Fsym%3Dcea

http://www.nyse.com/listed/p1020656067970.html?displayPage=http://www.nyse.com/cgi-bin/ny_quote?sym=ZNH

Furthermore, other airlines, such as Shanghai Airlines are now listed on the Shanghai bourse.

And what about Hainan Airlines which has nearly 15% owned by American Aviation LDC? American Aviation LDC being owned by a foreigner -- a foreigner who goes by the name of George Soros -- although he is currently in the process of selling that share -- or has he sold out already?

http://www.hnair.com/en/investor/Survey/Shareholders.asp

And contrary to what people such as corpnerds might think, China is a communist nation politically, but economically it is becoming more and more capitalist. The airlines in China (the majors anyway) are not run like CAAC was in the past -- as a public utility -- but they are run for profit. The majors produce profit and loss statements -- something you would NOT see if the communist argument above was true.
 
shankly
Posts: 1203
Joined: Tue Jan 11, 2000 10:42 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 1:56 am

China is MASSIVE, although strangely only has 50 commercial airports.

It is probably comparable with the US in the 50's and 60's. Lots of regional based airlines that will eventually become sub-continental based (i.e. East Coast, Beijing etc) and eventually sub-international, like most current European and US carriers.

What complicates matters of course is that China's emergence as an aviation power has co-incided with the LCC revolution. My experience of flying in China has been very good. having flown with Air China, Shanghai Airlines & China Eastern, all offered full service, on spanking new jets, but at basement bottom prices. You don't need to be an airline exec to realise this can't last
L1011 - P F M
 
Lufthansa
Posts: 2303
Joined: Thu May 20, 1999 6:04 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 1:56 am

Corpsnerd09

Your statment is ignorant....nobody is putting down america, but obviously your are not very aware of the state of Modern China. I might add that China is now the worlds second largest economy, having overtaken both Germany and Japan!!!!!! This isn't all rice paddies folks.

Corpsnerd09, I am not trying to attack you, but it is this kind of statement, that offsides foreigners from the american public. Your not doing your countrymen any favors running around the place making statements like that....and before you go up me, i've lived in america so im hardly some anti-american. The chinese have been very good customers to Boeing lately. One should value their contribution.(at least from the american perspective)
 
cjuniel
Posts: 123
Joined: Sun Dec 21, 2003 2:02 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 2:32 am

I have to agree with Lufthansa. That is a very ignorant statement. Further, the big three of China DO NOT overlap on international routings to the United States, and I would imagine other destinations. Their airlines mirror the US with the hub and spoke system, but on a smaller scale. That's like saying only one US airline should be allowed to fly from LAX or JFK to Tokyo, when in fact three do the routing. As said before, China is a huge country in both size and population, and from my perspective it looks like the government is trying to position their airlines to best compete globally with other carriers flying into their markets.
 
pelican
Posts: 2429
Joined: Mon Apr 05, 2004 9:51 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 3:14 am

@Lufthansa
You are right with the state of the Chinese economy being one of the strongest and fastest growing economies in the world.
But they are still the 4th largest economy!!!!
They will probably overtake the German economy in this decade because of their fast growth (and the German stagnation).
The Japanese economy is still more than triple of the Chinese, thus it will take some decades till China will outrun Japan.

pelican
I love to be nitpicking  Smile/happy/getting dizzy
 
carnoc
Posts: 758
Joined: Wed Oct 17, 2001 3:15 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 3:51 am

Shankly, just a correction to your post, China does currently have at least, if not more, 150 commercial airports (although many of them are smaller regional airports) on its mainland.

Best Regards.
 
carnoc
Posts: 758
Joined: Wed Oct 17, 2001 3:15 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 4:17 am

By the way, most Chinese carriers have released their passenger traffic reports for March, and overall almost every single carrier had experienced a surge in passenger traffic volumes of somewhere in between of 20% and 40% compared to the same period in 2003, so I guess there is certainly a room for multiple carriers to grow with that kind of 'impressive market growth' in China.

Best Regards
 
Lufthansa
Posts: 2303
Joined: Thu May 20, 1999 6:04 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 4:18 am

Pelican

If you measure China's GDP on a purchasing-power parity basis with the US dollar, (which we inorder go gage a real idea of economic activity and living standars), on a GDP/capita of around just USD $5000 a person, china rates number 2. Remember there is more than a billion of them so it adds up quick.

That gives us a GDP of around $5.989 trillion, in the year 2002. By comparison, the US is $10.45 trillion, with giving us a per capita figure of around $36,300, also for 2002.
Germany. $2.16 trillion - $26, 200 per capita
Japan. $3.651 trillion - $ $28,700 per capita
UK. $1.528 trillion - $25,500 per capita
France $1.558 trillion - $26,000 per capita.
(source: cia factsbook, availible online at www.cia.gov)

The other major reason for adjusting prices to a purchasing parity basis rather than just using floating exchange rates is we want to see the "real" level of economic activity and not merely temporary fluctuations do to market shocks. This is standard practice in economics around the world, although some politicians will qoute figures that haven't been adjusted inorder to make things appear for favourable than they actually are. A good site if your interested is that of the central intellegence agency. The US government does a good job of profiling each country on a data base.

however, even if we look at china in terms of the unadjusted exhange rate, taken at the standard rate for 2002, it still steams as significantly important and still ranks number 4.
China 1,266,052,104,192.00
Germany 1,984,094,928,896.00
Japan 3,993,433,014,272.00
United States 10,383,100,215,296.00
(Source: World Development Indicators database) availible http://www.worldbank.org/data/dataquery.html.

Of interest to everybody else may be the fact that the worldbank includes avaition in its consideration of the development of a nation. The number of landings, aircraft etc, are all there too.

So, if we purely look at it in terms of 2002 USD, we arrive at china as number 4. It really depends how you wish to define it. I chose pricing parity because china has a fixed exchange rate and i feel this more accurately reflects their level of economic activity. If china floated its exchange rate tomorrow, it is more than likely the yuan would appriciate signficantly and thus both values would reflect that level of activity in the figures. That appriciation could in turn lead to a drop in exports.... but as far as a snapshot in time is concerned we'd expect a significant appriciation. How much is hard to say...chinese central bank aren't exactly open with all their figures.

Still it is an absolutely facinating area, don't you think?

[Edited 2004-04-25 21:32:47]
 
pelican
Posts: 2429
Joined: Mon Apr 05, 2004 9:51 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 5:46 am

Lufthansa
I love statistics - you can prove everything with facts.
Your idea seems to me quite logic... Fortunately the yuan has a fixed rate (not fortunately for the us-exports).
5000 $ per Capita for China seems to me quite -maybe too - high, but then purchasing power parity isn't always mathematical exact.

I don't like the dollar base because the German (all Euro-nations) economy would have grown in the last term on this base (and the German economy hasn't really grown) .

BTW I have a source (the German governmental statistic agency http://www.destatis.de/cgi-bin/ausland_suche.pl) which shows me a real (fixed price basis) GDP/Capita of 32 855 US-Dollar for Germany in 2002,
31 399 US-Dollar for the US of A (2001),
878 US-Dollar for China (2001)
and 44 353 US-Dollar for Japan (2001).
unfortunately the newer values aren't for free.
With this values we have the same order (though China isn't the 4th).

What was it, that I wanted to prove? - Statistics are vague - I found ianother indicator that proves me right, but am I???

pelican
 
MileHighClub
Posts: 47
Joined: Thu Jan 15, 2004 10:21 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 11:48 am

Just want to add a note about domestic competition - There is no competition on fares. All carries offer the same fares between city pairs. However, your selection of carrier is based on schedule, aircraft flown, and inflight service where there are huge variances between carries.
 
Lufthansa
Posts: 2303
Joined: Thu May 20, 1999 6:04 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 2:36 pm

Pelican

you said don't like the dollar base because the German (all Euro-nations) economy would have grown in the last term on this base (and the German economy hasn't really grown)

That is why we adjust for purchasing parity. You've outlined that point exactly with the fact that the appreciation of the Euro against the US-Dollar would have made it appear that the single currency zone has grown and we all know too well (unfortunately) that it hasn't. I am not sure how much macro economics you've done, so if i oversimplfy things please do not take offence. Although the yaun has a fixed exchange rate, like all countries, the real exchange rate still varies.... that is, the purchasing power of say, 1 dollar. This comes largely due to inflation. Its almost impossible to fix both exchange rates and inflation.

The US dollar is used, as this is the standard international form used by the world bank, the united nations, the IMF etc. Its got nothing to do with appeasing american interests, but one can run into the same problems with picking any major currency. Lets say we picked the Euro instead. We'd need to make ajustments for the other currencies to due to the temporary fluctuations. Especially in the case of say, South Africa with the huge appreciation of the rand in the last year. South Africa certainly hasnt' seen that kind of growth, and with the government they've got their not likely too either. Think of it like Consumer price index. You take a basket of goods, and take the weighted average price inorder to gain some idea of inflation. Same concept. This is the idea behind the "big mac" index. The basic idea is that you can gauge if a currency is under or over valued by comparing the price of a big mac in each country... the idea being that it should work out to be "around" (not exactly due to factor imput differences) the same price in each country. Those countries where it is really cheap will expence an export boom, which in turn will lead to huge flows of capital into their country. If you fix the exchange(subject to factors like political stability etc), inflation will take care of those price differences, and this is what's happening in china although to the what extent is really the big question everybody wants to know. The extent is actually quite extreme. The woman i know who used to work as a Doctor there was only paid about $180 a week. But that probably gave her a similar living standard to somebody say earning $60 000 or say 75 000 euros. So there is a BIG adjustment factor in the case of china. The main point being, there is still that same level of activity. And that, is what we are really interested in.

The german statics you mentioned above also prove this point. By your figures, the german and japanese living standars are higher than that of americans, but clearly they're not. Americans consume far far more. They drive more cars, larger ones, consume more supermarket food, live in larger houses, etc. So looking at it on a per capita basis without adjustment can be confusing.
200 million chinese at the moment are living in big cities, in modern appartments, with tv's computers dishwashers, airconditioners, etc. Basically, 200 million ppl are now out of poverty. It is there consumption that drives it up to the USD 5000 mark. Think of it. If say consumed at a level equivalent to say, 20 000 euros per year each, but the other 800 million consumed at a level equiv to say a mere 800, you'd get that kind of figure.

I have just had a look at the german stats website, and the GDP per capita figure is unadjusted and taken at 1995 exchange rates. That doesn't give us a very good indication of the level of activity. The site states also that most of those figures come also from the world bank etc... they just haven't been adjusted yet, and although they are older than thus less accurate, they are still based on the same sampling information. They haven't been processed. I have a german passport and my family are largely germans so i don't want to see good old DE pushed off its pirch, but i think realistically, it's already happened.
The other major influencing factor is do we follow Kanesian economics, or Neo-classical. Most of the world says Neo-Classical now... but european governments seem to prefer kanes?
 
geekydude
Posts: 263
Joined: Mon Apr 26, 2004 3:09 pm

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 3:49 pm

I agree with Lufthansa's posts. It's likely taking Econ 1010 all over again, in an aviation-related way though.

I can see why Yanksn4 brought up this topic. He does have a point in that a single airline would sound a plausible to go provided that the government was really in total control and ownership of the civil aviation industry. Well, that might be true, say, 15 years ago, when CAAC was in charge of everything. Not anymore! We've witnessed in the past 15 years or so a booming of smaller airlines as a result of deregulation, and very recently attempts to consolidate the smaller newcomers and CAAC derivatives into the more efficient 'big three'.

I am not aware that as of yet there exists any true privately owned airlines in mainland China, but the industry over there has surely come a long way in terms of privatization. In this regard, competition has indeed entered the picture big time; right now, it simply makes no sense to run the industry with just one big bulky inefficient airline.

Coming back to economics, the First Fundamental Theorem of Welfare Economics states something to the effect that private decision-making on the part of economic agents can bring about the most efficient outcome for society as a whole provided that markets are complete and well-functioning.

Vive l'economie!

FLIB 152 'heavy' low approach...Caution wake turbulance!
 
donder10
Posts: 6944
Joined: Sun Oct 21, 2001 5:29 am

RE: Why Does China Need Multiple Airlines?

Mon Apr 26, 2004 4:54 pm

To Donder10 and Celticmanx,

China being a communist nation, there are no privately owned airlines, unlike in the U.S. So if every airline is owned by the government, why should they all fly the same routes? Since U.S. Air carriers are privately owned then it is a competition to make money. Thus, if LAX - JFK is a proftable route, many American airlines would want to make money off of it.But, if all the Chinese airlines are owned and operated by the government, wouldn't having just one of them doing one route be sufficient enough? Think of that before you start putting down America.

LOL ,don't get in a twist.China has multiple airlines for the same reason as other countries do:competition and to prevent diseconomies of scale.And calling China 'communist' is a stretch today.Politically yes but economically it isn't really anymore.
 
hkg_clk
Posts: 980
Joined: Sun Jan 07, 2001 2:56 pm

RE: Why Does China Need Multiple Airlines?

Tue Apr 27, 2004 12:08 am

From a spotters and/or a photographer's point of view though, having fewer airlines in China is less interesting. Wish they stuck with the original multi carrier policy  Sad

hkg_clk
See my homepage for a comprehensive guide to spotting and photography at HKG
 
N754PR
Posts: 2909
Joined: Mon Oct 04, 1999 10:03 pm

RE: Why Does China Need Multiple Airlines?

Tue Apr 27, 2004 12:17 am

This takes the cake as the most silly topic of the year so far.

How about this for a question. Why don't the USA and Canada only have one massive loss making carrier instead of lots of smaller loss making carriers  Smile/happy/getting dizzy
Bush, your a sad, sad man.
 
pelican
Posts: 2429
Joined: Mon Apr 05, 2004 9:51 pm

RE: Why Does China Need Multiple Airlines?

Tue May 04, 2004 6:24 pm

Lufthansa
I am not sure how much macro economics you've done - obviously not much... thanx for the lesson

i don't want to see good old DE pushed off its pirch, but i think realistically, it's already happened - I have no problem with China's growth -they have 1,3 billion citizens, hence it should be naturally that they overtake the German eco size wise.

If I understood the "big mac" index right -the situation in UK isn't really nice???

but European governments seem to prefer kanes nope I don't think so, because in Germany the investments in such valuable things like infrastructure are declining for years. The gov. tries to lower the debts for years - 3.xx new indebtedness doesn't indicate kanes. But the economics aren't Neo-Classical, too. A mix between both could be good but definitely not in the German way... Declining investments in infrastructure + growing state consumption and worthless tax cuttings...

BTW. Luthansa you're now member in the very exclusive club of my respected users  Wink/being sarcastic

pelican


[Edited 2004-05-04 11:29:14]

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos