China Southern Airlines
China Southern Airlines is based in Guangzhou in Guangdong Province in southern China. It’s the world's fifth-largest airline measured by passengers carried, and Asia's largest airline in terms of both fleet size and passengers carried. It was established in 1988 after a restructuring of the Civil Aviation Administration of China, and has grown since then through acquisitions and mergers to become one of China's "Big Three" airlines alongside Air China and China Eastern Airlines. It is a member of SkyTeam.
Airlines lose ground to high-speed trains
Mainland airlines are facing stiff competition from high-speed railways that are set to cover 80 per cent of the airlines' current network by 2020 and offer passengers a cheaper and more reliable ride.
The impact is already being felt on air ticket prices, with 11 high-speed rail lines offering services in excess of 250km/h starting operations across the nation this year and providing a journey that is sometimes quicker than air.
While good news for passengers, the rise of high-speed rail spells trouble for an aviation sector already struggling with rising fuel costs and competition.
Air China concedes that one of the biggest advantages of train services over airlines is on-time performance. 'Railway does not succumb to adverse weather and thus has a better punctuality record,' the Beijing-based airline said in an e-mail to the South China Morning Post. 'Airlines are subject to restrictions of weather, air routes and air traffic control, leaving its operation not as steady as a train service.'
Snowstorms in northeast China earlier this month left stranded hundreds of thousands of passengers at airports in Beijing, Taiyuan and Shijiazhuang. Some angry passengers said they had been abandoned by airlines in cold waiting lounges without meals or information.
With most train stations in central areas, as opposed to the remote locations of some airports, trains were quicker for journeys under four hours while air was better for longer trips, Air China said. The highest speed of a train service is 350km/h compared with 900km/h for a passenger jet.
'High-speed railway will cover nearly all of the prosperous and most populated areas on the mainland, leaving 80 per cent of the aviation market under attack,' Si Xianmin, the chairman of China Southern Airlines, said this month.
Ally Ma, a transport analyst at Citigroup, said China Southern would be the hardest hit as most of the railway network overlaps with its own.
Five of six high-speed railways to be opened from this year up to 2014 will conflict with China Southern's network, according to a Citigroup report. That compares to three for Air China and China Eastern.
Loss of passengers to 'high-speed railways looks marginal between 2010 and 2011', Ma said. 'But the risk magnifies from 2012, with Beijing-Shenyang, Shijiazhuang-Wuhan and Hangzhou-Changsha trains starting operation.'
The biggest challenge would come in 2013, when a fast rail line between Beijing and Shanghai begins operation, she added.
At the moment, though, Air China, which has 33 per cent of the Beijing-Shanghai market, does not seem too worried.
'There will be limited impact on the Beijing-Shanghai service,' Air China said.
It added the train ride would take five hours, meaning it could only lure low-end passengers and not premium business travellers.
There are 43 daily flights by four airlines including China Eastern, Shanghai Air and Hainan Airlines between Beijing and Shanghai, moving 8,500 commuters in one direction per day. The average annual growth of the route was a robust 6 per cent, Air China said.
The first casualty of the keen competition between rail and air has been the Chengdu-Chongqing route. Sichuan Airlines, the last airline serving this route, closed the leg last week after its 16-year operation because of a plunge in passenger numbers.
Eleven rail links have been opened this year, including routes from Wuhan to Hefei, Shanghai and Nanjing, and Beijing to Shijiazhuang.
Once the Guangzhou-Wuhan rail link, which runs at 350km/h, starts operation next month, the travel time by train will drop to three-and-a-half hours from more than 10 hours in the past. As a result, air fares from Guangzhou to Wuhan have plummeted to as low as 280 yuan (HK$318), equivalent to about a 70 per cent discount to the full-price ticket.
After the Beijing-Taiyuan railway started operation in April, the number of daily flights between the two cities decreased to nine from 12 because of a 30 per cent drop in passenger numbers.
According to the Ministry of Railway blueprint, the mainland will build 16,000 kilometres of high-speed railway by 2020, with trains running as fast as 350km/h.
By 2012, 42 high-speed railway links amounting to 13,000 kilometres will be finished, of which 5,000 kilometres will be operated at 250km/h while 8,000 kilometres will run at 350km/h.
The plan is to cover 70 per cent of the country's key cities with a population of more than 50 million people.
The master plan, including routes from Beijing to Shanghai, Beijing to Shenzhen via Wuhan, Shanghai to Chengdu through Hefei and Hangzhou to Shenzhen, mainly focus on eastern and central mainland, where the economy is more vibrant. These are also airlines' key markets.