AirAsia’s China network reaches 20 destinations, cementing its position as leading low-cost brand

AirAsia’s Chinese network will reach 20 destinations in Dec-2018, further strengthening the group’s position in Asia’s largest market. It is already the largest low-cost brand in China’s international market and currently has nearly 150,000 weekly seats to or from China, giving it around a 27% share of total international LCC capacity (based on CAPA – Centre for Aviation and OAG data for the week commencing 15-Oct-2018).


Summary:

  • AirAsia X is resuming services to Tianjin in Dec-2018, which will give the AirAsia brand 20 destinations in China;
  • AirAsia is the largest low-cost brand in China’s international market with nearly 150,000 weekly seats;
  • Spring Airlines, China’s largest domestic LCC, is the second largest low-cost brand in China’s international market, while the Lion Group and Scoot follow in third and fourth.
  • AirAsia is well positioned to continue expanding China given its already strong Chinese network, strong brand and strong local distribution network.

Spring Airlines, China’s largest domestic LCC, is the second largest low-cost brand in China’s international market with nearly a 20% share of capacity and Lion Group is third largest with nearly a 17% share followed by Scoot with around 12%. The Lion brand serves China from Indonesia and Thailand while the Scoot brand serves China from Singapore and Thailand.

AirAsia serves China from three Southeast Asian countries –Malaysia, Thailand and Philippines – using five airlines subsidiaries or affiliates. AirAsia also has affiliates in India, Indonesia and Japan but does not yet serve China from these markets. It will resume service to Tianjin with Kuala Lumpur on 2-Dec-2018. Malaysia-based long haul LCC AirAsia X will initially operate four weekly Airbus A330-300 flights on the route, which has not been served by any airline since AirAsia X suspended it previously in 2012.

Rival Scoot has served Tianjin since Aug-2012, entering the market at around the time AirAsia X withdrew. Tianjin was Scoot’s fourth destination – and first in China – after the Singapore-based LCC commenced operations in Jun-2012. Sister airline NokScoot added services to Tianjin from Bangkok in early 2016.

Lion Group launched services to Tianjin in early 2018 and has quickly expanded to become the largest low-cost brand (foreign or Chinese) in the Tianjin market. It currently has more than 8,000 weekly seats to/from Tianjin. It has scheduled flights from Bangkok and Phuket (operated by Thai Lion) and charter flights from Bali and Manado (operated by Indonesia-based Lion Air).

Spring Airlines is the largest Chinese low-cost brand in the Tianjin market and has around 7,000 weekly seats. Spring currently links Tianjin with two Chinese cities (Yancheng and Yangzhou), two Korean destinations (Jeju and Osaka) and Tokyo Narita in Japan. The Tokyo flights are operated by its affiliate Spring Airlines Japan.

Tianjin is a logical new market for AirAsia given it is currently served by its low-cost rivals and the fact it is one of the largest cities in China not currently served by the LCC. Tianjin has a population of around 16 million but its Binhai International airport also acts as an alternative gateway for the Beijing area. The capital city is only 130km from Tianjin and connected by high speed train in only 35min.

AirAsia X initially suspended services to Tianjin Binhai Airport when it was able to secure traffic rights and slots for Beijing Capital Airport. However, there should now be sufficient demand to sustain services to both airports.

Tianjin is the 18th largest airport in China based on current seat capacity. The only larger Chinese airports not currently served by AirAsia are Shanghai Hongqiao (AirAsia serves Shanghai Pudong) and facilities in Xiamen, Zhengzhou, Qingdao and Urumqi.

Zhengzhou ironically was the base for proposed start-up AirAsia China. AirAsia forged a preliminary agreement with Chinese financial firm Everbright and Henan province in May-2017 to launch an AirAsia affiliate in Zhengzhou but the plans were dropped two months ago as the deal lapsed.

While AirAsia is still keen to launch a Chinese affiliate, which would enable it to access China’s huge domestic market, there are also plenty of opportunities to pursue expansion in China using its existing affiliates. AirAsia could easily double – and potentially even triple – its network in China without launching a local affiliate. While AirAsia will soon serve 20 Chinese destinations, there are currently 75 airports in China with international services and 54 of these already have international services from LCCs.

AirAsia is also able to expand in China by launching new routes from more of its bases to its 20 existing Chinese destinations, following a connect the dots strategy. AirAsia has been growing over the last few years in China by launching new routes to existing destinations from secondary cities in Malaysia, Thailand and the Philippines – in particular increasingly popular Chinese holiday destinations such as Langkawi, Chiang Mai and Kalibo/Boracay. AirAsia will likely start to follow a similar strategy in launching services from Indonesia to China, another fast-growing inbound tourism market.