Asia is the largest continent in the world, both in land mass and people. With a population of over four billion, it is also one of the most important aviation markets. In this three-part series, we will examine the future of Asian aviation through different geographic realms. First, let’s take a look at East Asia.
East Asian aviation market
China is by far the largest aviation market in East Asia. In a distant second place comes Japan, followed closely by South Korea. The East Asian market was not always like this, however. Let’s take a look at changing passenger numbers in history, as published by the World Bank.
As you can see from the data, China has very recently become a major source of passenger traffic. Japan, meanwhile, has seen steady growth that has slowed in recent years compared to other powerhouses. Now that we have some background on passenger data, we can look ahead and see what might be in store thirty or so years from now.
Japan was the most important aviation market in East Asia less than 20 years ago. Combined, Japanese carriers transported over 109 million passengers. The two major carriers in Japan are ANA and Japan Airlines.
All Nippon Airways (ANA) is the largest airline in Japan based on fleet size. In 2016, ANA carried over 52 million passengers.
ANA has done well over the last few years. Looking ahead, they are adding a major boost to the leisure market by placing A380s on services between Tokyo and Honolulu. However with the end of the A380 inching closer, one has to wonder exactly how long ANA will operate these giants. As a member of the Star Alliance, ANA also provides options for international passengers looking for ways to reach Japan.
Japan Airlines is the second largest airline in Japan by fleet size. Something they are not very well known for, but should be, is having some of the most comfortable 787s out there. Some of Japan Airlines’ 787-8s only seat 161 passengers. Japan Airlines also chose passenger comfort over profitability and went with a 2-4-2 configuration in economy.
Japan Airlines, a Oneworld member, partners closely with American Airlines. With this partnership, they have access to one of the most important markets for Japanese and foreign tourists: the U.S.
Overall, the problem with Japan is that passenger numbers aren’t booming as they are in China. Passengers tend to fly with carriers from their home countries. In nearly all cases, Japanese tourists prefer to fly with Japanese carriers because it makes the travel experience easier.
Due to language barriers, many travelers prefer to fly with their home carriers since it is easier to understand them. Many lost-in-translation events can happen while traveling and language barriers can always detract from an experience.
For example, on my recent flight with Vietnam Airlines, despite an incredibly warm and efficient crew, it took some effort to be able to communicate. Though not a problem for me, many others may choose to make their experience easier by choosing to fly with a Japanese carrier. The same is true for other passengers who may be traveling to Japan.
Japan is well-known for having an aging population, and this doesn’t bode well for Japanese carriers. Older passengers may experience more discomfort from travel and decide against it. As many international carriers try to cram in as many seats as possible, the same is not necessarily true for Japan’s leading carriers.
This means that, in the future, it would be reasonable to expect Japan’s airlines to avoid expansion in favor of bolstering their yields with connections from partners. Both Japan Airlines and ANA have alliance partners with whom they can closely cooperate.
On the other hand, China is a huge source of passengers. With the largest population in the world in a rapidly industrializing country, there is a significant push to increase passenger numbers. With three major international airlines, China will definitely be a major aviation force in 2050.
Flag carrier Air China operates its largest hub at Beijing’s Capital International Airport. With over 400 aircraft in its fleet and another 100+ on order, Air China is preparing for massive growth. Once Beijing’s second airport opens, there will be a significant increase in airline capacity. By effectively using these additional slots, Air China can maintain their competitive edge in China’s capital. As the flag carrier, undoubtedly there will be a significant push from the Chinese government to keep Air China successful and afloat.
In the future, Air China will have to contend with competition once Beijing’s new airport opens for business. However, the carrier currently benefits from a near monopoly on long-haul routes out of Beijing. These lucrative routes bring plenty of profits and passengers on Air China metal. For example, Air China is the only Chinese airline to serve long-haul destinations to Star Alliance hubs like Johannesburg, Frankfurt, and Washington-Dulles.
China Southern is China’s largest airline by fleet size. Boasting their expectations for a 2,000-plus fleet, China Southern is well on its way to this goal with over 600 aircraft in service and more than 200 on order.
However, what China Southern needs to reconcile is Guangzhou. Though a major hub for China Southern, Guangzhou has a distinct lack of foreign carriers operating there. Notably absent are European carriers like British Airways, Lufthansa, Air France and KLM, as well as American Airlines, and Qantas.
Guangzhou is a major destination in China, however even as the best commercial city, major foreign airlines don’t seem to find a reason to operate there. Some of the decision is no doubt politically motivated, but, even China Southern has its sight on expansion from Beijing Daxing.
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Despite this, Guangzhou still lacks notable connections to destinations like Chicago, Dallas, and Munich. Furthermore, while Beijing and Shanghai have a major tourist draw, Guangzhou lacks this particular attraction. Much of it, in fact, is lost to nearby Cathay Pacific hub in Hong Kong.
China Eastern is China’s second largest airline by fleet size. With close to 550 aircraft in operation, China Eastern maintains Shanghai as a major hub. While China Eastern doesn’t have the same ambitious plans as China Southern, they still will be a force to reckon with in 2050.
China Southern, as of now, doesn’t have any major international partners. Though they’ve recently become closer with American Airlines, China Eastern and Delta have solidified their strategic partnership. This puts China Eastern ahead of Air China and China Southern.
Inaugurating new routes and building up partnerships takes years. For airlines, it is important to gain passenger recognition and trust with new routes. As Delta becomes closer with China Eastern, they put themselves ahead of the competition with access to mainland Chinese tourists. The same is true for China Southern. Connections from interior destinations lacking long-haul flights to the United States will be a huge market.
Hong Kong’s aviation market is dominated by Cathay Pacific. Although Hong Kong Airlines seeks to mount significant competition against Cathay Pacific, they lack the solid financial footing and funding (at least publicly) to significantly compete against Cathay.
Cathay Pacific keeps growing. Between separating long-haul and low-cost operations to acquiring HK Express, Cathay still has a major hold over Hong Kong. However, by 2050, Hong Kong Airlines could also be a formidable force of its own.
Already, they operate long-haul services to major destinations. However, they will need to offer additional connections and partners to bring more passengers on-board their planes.
Hong Kong is already a well-known destination. With both high-end business travelers and leisure travelers, Cathay Pacific seems well on its way to staying afloat. However, if Cathay Pacific does have to contend with the rise of low-cost carriers in East Asia, things could become trickier in future.
South Korea is home to two major airlines: Asiana Airlines and Korean Air. Despite an East Asian boom, South Korean passengers haven’t grown to the size of Japanese or Chinese numbers. On the other hand, South Korea remains well-connected globally.
Asiana is struggling financially and cutting their operations. Time will tell how this turns out for Asiana. In a best case scenario, their cost-cutting mechanism could turn things around. On the other hand, they may end up like Etihad, stripping back services to maintain profitability, or go completely bust like Jet Airways.
Korean Air, Asiana’s main rival, has avoided negative headlines about their financials. While Asiana cuts routes, Korean Air has expanded to new destinations– including some lesser-known places like Croatia.
As the national flag carrier, Korean Air is likely to outlast Asiana Airlines. While they have a long-haul network that ranges from quirky destinations to high-demand cities, Korean Air will likely remain flying as Seoul remains a hub for modern-day technology and tourism. With ties to large, global corporations, Korean Air will have a strong base of premium passengers looking to go to and from Seoul.
The rise of low-cost carriers
Where there are passengers wanting to travel, there is competition. Among carriers, the competition ranges from who offers the best onboard product to who offers the best fares. On the high-end, where airlines make most of their money, they compete with onboard hard and soft products. At the other end of the spectrum, the price-conscious passengers have led to the rise of new competition: low-cost carriers.
From Japan Airlines, we have “ZIPAIR“, a to-be-launched long-haul low-cost carrier. Meanwhile, ANA went with a more traditional short-haul low-cost carrier in Peach.
In recent years, low-cost carriers have sprung up across East Asia. However, they have not grown to the likes of Ryanair and Southwest. That isn’t to say that low-cost carriers won’t catch on like they have in other markets. However, with China as a major growing market, China seems like the most likely contender to grow a major low-cost carrier.
The Chinese aviation sector is heavily marketed, which could prove to be a hindrance to the rise of low-cost carriers. However, the liberalization of air markets is a major trend in the aviation industry. This could be a major change in China’s future. The results could be beneficial for passengers who receive more options and connections on more carriers.
East Asia is a fascinating market. Coupled with high-demand tech cities and growing tourism, the market will continue to evolve in years to come. As markets grow, some airlines may inevitably grow too fast and go out of business, while others will thrive and could become global competitors.
What do you think East Asian aviation will look like in the future? Let us know in the comments!