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China's CAAC Opens More Resources for International Flights

China's CAAC open to increased International Flights

2018 05 25

2018 05 25

Civil Aviation Administration of China (CAAC) publicized the newly revised International Air Traffic Rights Resources Allocation and Use Management Methods on May 14, mainly focusing on the resources of international flights for domestic airlines. The new version opens and regulates a series of international air traffic resources, especially navigation rights.

It is not easy to open new international air routes, considering the cost and various restrictions. To fly overseas, international air traffic rights are necessary, which are divided into 9 categories.

Before, the industry followed the rule of "one long-haul international air route for one carrier." For instance, after China and America signed the international air traffic rights, only Air China runs the Beijing - San Francisco route, i.e. the market excludes other competitors. Hence, instead, Hainan Airlines opened Beijing - San Jose route, an airport in San Francisco Bay Area.

The new rule classified international air traffic resources and listed explicit requirements for the qualification of carriers. Meanwhile, it will expand the allocation principle of several long-haul international air routes, in a bit to allow new airlines to join the market.

Specially, the international air routes have been divided into First Class and Second Class. The first class will not limit the numbers of carriers and operating flights for one route, mostly suitable to routes flying to the countries which have opened a lot air traffic rights for China, like America, Britain, Singapore and so on, while the second class includes routes to the countries where air traffic rights for China are limited, such as those in Oceania and so on. For some long haul air routes in the second class, there will be one more carrier running, since new competition mechanism will be introduced.

In the meanwhile, the new rule also defined the qualification for new comers, which will be evaluated comprehensively by 4 indexes, namely, consumer benefit index, hub development index, resource utilization rate index and enterprise operation quality index. The carriers that failed the four factors will not be allowed to join the market.

Besides, the rule explained the air traffic rights planning and allocation of Beijing's new airport, temporary called Beijing Daxing International Airport. The main base airlines will be China Eastern Airlines Group and China Southern Airlines Group, which will transfer all of their international flights from Beijing Capital International Airport to the new airport in four years since the new airport starts to work.

In terms of air routes, Beijing Capital International Airport and Beijing Daxing International Airport share one waypoint, that is to say, the air route starting from both airports to one destination abroad will be seen as one route.

The current running International Air Traffic Right Allocation and Use Management Temporary Method was formulated in 2009. Instead of open, transparent and unified principles of international air traffic rights allocation, mostly the distribution of resources is decided by CAAC, in order to avoid over competition in low-profit air routes.

As a matter of fact, most international air routes are not so profitable, due to the high cost of jet fuel in long distance travelling and the expenditure in large aircraft purchase, in addition to the competition from international airlines.

This month, American Airlines announced that it will suspend Beijing - Chicago route in October 22, a route that has been run for over 8 years, because of fierce competition. Besides American Airlines, there are 2 more airlines that are currently running this air route, American United Airlines and Hainan Airlines. Thus, there are 3 flights per day direct flying from Beijing to Chicago. In a bit to take over the market, Hainan Airlines' price used to be 1/3 of American Airlines.

In recent years, Chinese international air routes have been increasing in quite a rapid rate. According to data from Center for Asia-Pacific Aviation (CAPA), there were 24 intercontinental air routes between 2007 and 2013 and the amount increased up to 78 from 2014 to 2018. The number of international air routes trebled in 5 years. Not only did the largest three airlines facilitate their international network layout, but also some medium-sized airlines, like Tianjin Airlines and Lucky Air, affiliated to Hainan Airlines Group, Sichuan Airlines and Xiamen Airlines are eager to join the market.

The new added air routes are mostly in second-and-third-tier cities, where the large amount of government subsidy attracts airlines to keep opening new international air routes. "Presently, over million or even 100 million government subsidies mainly aim at international air routes in second-and-third-tier cities every year. It is positive for a second-or-third-tier city to have direct flights to America and Europe when it comes to propaganda or foreign investment", said Qi Yaoming, spokesman from Guangzhou Baiyun International Airport.

However, issues have come up on whether the scale of local government's subsidy is reasonable or not, for airlines possibly will stop the air route if profit falls when the subsidy stops.

Also, it is essential to take airports' slot resources into consideration. Though the new rule bestows new entrants to have air traffic rights, airports' allocation of departure and landing could not be so available. The slot resources should be negotiated by carriers, airport and civil aviation departments. New air routes have been surging these years, so the new comers may not have a good slot for their flights, which will influence the sales of ticket as well.

It is necessary to mention that the new rule has not fully opened the rights for long haul international air routes. Mainly focusing on the newly opened air routes, the new rule states that merely one carrier is allowed at least within 3 years, which is a guarantee to maintain profit for the new routes.

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