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China Eastern wants to gain more market share in Beijing

By Zhang Jiawei (chinadaily.com.cn)
Updated: 2009-07-07 18:00

China Eastern Airlines, one of China's three largest carriers, is now taking a step to strengthen its position in the Beijing market, which is dominated by its bigger rival Air China, after recent moves to set up a joint venture with the Yunnan provincial government and take over Shanghai Airlines, 21st Century Business Herald reported today.

The Shanghai-based airline will hold a press conference at the Great Hall of the People in Beijing on the afternoon of July 8 to announce the full commencement of its service for the Shanghai 2010 World Expo, and "more important, the transport capacity deployment in Beijing", a company executive told the paper.

Holding the news conference in Beijing instead of Shanghai indicates the airline's intention to promote its Beijing branch, the report said, citing a Shanghai-based aviation analyst.

"It aims to gain more market share in Beijing," the analyst said.

On July 1 of this year, the company's Beijing branch, which had not had its own aircraft or cabin service system since its opening in July 2007, took control of an A330-300/B-6083 plane, in a strategic move by the carrier.

According to company plans, the branch is to take over another three A330-300 planes in July and add five A320 planes to its fleet by the end of 2009. It will operate domestic routes connecting Beijing with Shanghai, Xi'an, Dalian, Hangzhou, Wenzhou and Kunming, as well as international routes linking Beijing to Tokyo and Delhi, according to the report.

The planes that formerly stayed overnight in Beijing belonged to either China Eastern's headquarters or its subsidiaries and the Beijing branch only acted as a landing base for China Eastern's planes.

Related readings:  China Eastern reports steep full-year net loss  China Eastern to buy 20 Airbus A320 jets  China Eastern, Shanghai Air set up revamp team  China Eastern, Yunnan govt to set up JV

According to the report, as early as 2006 when its Beijing branch was yet to be established, the volume of passengers China Eastern handled in Beijing topped 6 million, second only to that in Shanghai.

But that was apparently outperformed by Air China. It had 44 percent market share in Beijing in 2006 while China Eastern had only 12.9 percent. And China Eastern failed to gain an intended equal footing with Air China after setting up its Beijing branch.

Beijing's air passenger flow is large and the yields from the flights are high, which makes many airline companies eager to have a hand in the Beijing market, analysts say.

But for many years, China Eastern has been competing with Shanghai Airlines as well as Air China to increase market share in Shanghai, making the expansion of its Beijing presence almost impossible. The airline only had 35 percent market share in Shanghai before its proposed merger with Shanghai Airlines finally approved by authorities last month.

In early June, China Eastern Air Holding Company, China Eastern's parent, and the Yunnan provincial government agreed to set up a joint venture to further develop the air travel market in the southwestern province. The carrier will hold a 65 percent stake in the joint venture.