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Description

Description

“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.”

Ruyi Xu, Deputy Research Manager

Some questions answered in this report include:

  • How big is the airline market in China and what will this market grow into over the next five years?
  • What are consumers’ behaviour and attitudes towards air travel?
  • How can airlines in China strengthen their financial position by maximising revenue potential from economy class flyers?
  • What have fast-growing airlines in China done to attract customers and how can airlines in China compete to deliver better customer services under global competition?
  • What is different about running low-cost carriers in China, and what challenges and opportunities do they have?

What's included

What's included

Table of contents

Table of contents

  1. 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

                                                                                                                              About the report

                                                                                                                              This report will give you a complete 360-degree view of your market. Not only is it rooted in robust proprietary and high-quality third-party data, but our industry experts put that data into context and you’ll quickly understand:

                                                                                                                              • The Consumer

                                                                                                                                What They Want. Why They Want It.

                                                                                                                              • The Competitors

                                                                                                                                Who’s Winning. How To Stay Ahead.

                                                                                                                              • The Market

                                                                                                                                Size, Segments, Shares And Forecasts: How It All Adds Up.

                                                                                                                              • The Innovations

                                                                                                                                New Ideas. New Products. New Potential.

                                                                                                                              • The Opportunities

                                                                                                                                Where The White Space Is. How To Make It Yours.

                                                                                                                              • The Trends

                                                                                                                                What’s Shaping Demand – Today And Tomorrow.

                                                                                                                              Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted.

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