|Quoting RyanairGuru (Reply 3):|
Further to my last post, while I agree 100% that what CZ has achieved is incredible, I feel that the biggest "change" (and biggest loser) with regards to China-AusNZ is in fact not CA, but CX. This Australia-China has been dominated by Cathay forever, but in the space of two years a new kid on the block has seriously ruffled some feathers. This is a rapidly expanding market so Cathay will do just fine (plus they are still very much preferred for connections to other parts of the region, and indeed the world) but it would be interesting to see a breakdown of their Aus-PRC traffic figures that compares 2010 with 2012. I would expect to see a decrease in terms of both passenger numbers and yield.
The common believe is that these chinese carriers are doing awesome and they are doing a great job and that is why they are gaining market share...
Yes, they are indeed gaining a lot of market share, but why? They are gaining market share for one reason and one reason only, price... What is the reason why most airline can not effectively compete with mainland chinese carriers on price? That's because the mainland chinese carriers are heavily subsidize (especially with the fuel, as aviation fuel price is regulated by central government for use by domestic carrier and tare offer to them at below cost). Together with the mainland carrier lower labour cost, at fares that is profitable for CZ
flying the Pacific route), it will never be profitable for other carriers like CX
For example (these are fares that my auntie told me during different time last year, my auntie runs a local travel agent in HKG
Example 1) CZ
offer China to Australia return tickets at low season at discounted travel agent price as low as HKD3899 (tax and surcharged included), this is equivalent of HKD1950 one way. I have to pay more to fly within Asia, and here you are talking about a 9 to 10 hours of flying.
Example 2) CA
offer Hong Kong to JFK
via Beijing, return ticket of less than HKD5000 (tax and surcharge included). This is less than HKD2500 one way for a two sector HKG
, over 16 hours of flying...
Example 3) MU
offer Hong Kong to LAX
via Shanghai, return tickets of less than HKD4500 (tax and surchage included), add HKD300 for a night stay in Shanghai for your short vacation. This is less than HKD2250 for a HKG
, over 13 hours of flying...
With fares like that, it is impossible for anyone to compete with these Chinese carriers. You can barely pay for fuel with prices like that... So that is why they are able to gain so much market share in such short period of time. People always like a good deal.
So it is easy for CZ
boss to say they are profitable at all Oceanic routes... Yes profitable with subsidies, but subsidies will not last forever. The mainland government is already saying that they are going to try to bring the fuel price to level that will most closely match the real spot price.
The mainland Chinese government will most likely continue to subsidize their top airline until they have a big enough international market share before they will pare down on the subsidies... so for anyone willing to fly via mainland China, you will be able to continue to enjoy low fares, courtesy of the chinese government.