麥肯錫：中國航空公司如何為即將到來的動蕩做好準備（英文版）(12頁).pdf

1、October 2019 How Chinese airlines can brace for impending turbulence How Chinese airlines can brace for impending turbulence 1 Chinese airlines have grown rapidly. From 2009 to 2018, demand grew at 14 percent year-on-year,1 fuelled by strong domes- tic travel and outbound tourism that came with the

2、growing Chinese middle class. By 2018, China was the worlds second-largest domestic market and largest outbound tour- ism market. Over this period, the “Big Three” carriersAir China, China Eastern, and China Southernmanaged the single largest ca- pacity addition ever seen, all while improving safety

3、 and customer experience. Despite a favorable regulatory environment, Chinese airlines did not return the cost of capital for this expansion. In fact, from 2009 to the end of 2018, they accumulated $29 billion in economic losses. The Big Three contributed almost all of these losses (Exhibit 1). Look

4、ing ahead, its only going to become more difficult for the airlines to succeed: ca- pacity growth is on track to outpace natural demand growth, and impending regulatory changes will increase competition domesti- cally and globally. To manage these pressures, Chinese carriers should take five actions

5、: improve productivity and closely monitor costs, pursue ancillary (non-ticket) revenue opportunities, differ- entiate their products, secure spots in main hubs and increase the number of connecting flights they offer, and consolidate. By acting now, incumbent Chinese airlines can brace themselves f

6、or the coming turbulence. How Chinese airlines can brace for impending turbulence The coming years could prove challenging for Chinese airlines, which are already battling economic losses. They should focus on five opportunities. Steve Saxon, Qiao Xie, Zhi Wei Sok, and Zi Chen 1As measured by revenu

7、e passenger kilometres (RPK). 2How Chinese airlines can brace for impending turbulence -2.0 -14.0 -12.0 -10.0 -6.0 -8.0 -4.0 2.0 0 4.0 6.0 Source: McKinsey airline value chain analysis Top 28 airlinesBottom 28 airlines82 airlines Cumulative economic profit for global airlines, 2009-18 USD billions C

8、ut-off for bottom quintile Cut-off for top quintile .01 $340 bn-$1350 bn-$420 bn (2.1) Global carriersChinese carriers Exhibit 1 In the last decade, many Chinese airlines sustained economic losses, but the big three topped the list How Chinese airlines can brace for impending turbulence 3 Chinese ca

9、rriers seem set for a bumpy ride from the economy. Chinese GDP per capita growth has been projected to drop from 6.3 percent in 2019 to 5.4 percent in 2023; this economic slowdown in China, coupled with a similar slowdown globally, will likely have a negative impact on air travel demand and consumer

10、 spending. As such, we expect growth to decelerate in the Chinese travel market to 8 percent year-on-year from the 11 percent year-on-year it experienced from 2013 to 2018 (Exhibit 2). However, the Chinese airline industry shows no signs of slowing its capacity growth. Based on known aircraft orders

11、, Chinese carriers continue to add capacity at about 10 percent year-on-year. With supply growing faster than demand, carriers will feel pres- sured to drop prices to stimulate demand for the excess seats. To exacerbate the yield pressure,2 incumbent carriers will face increased competition from low

12、-cost carri- ers (LCCs), foreign carriers, and each other, driven by recentand anticipatedeasing of regulations. 2A key measure of airline profitability, yield is the amount of revenue earned per passenger mile. Turbulence ahead: excess capacity, intensified competition, and pricing pressures Source

13、: PaxIs, Euromonitor, IATA, OAG, Fleet Analyzer China airline market demand/supply analysis (domestic, outbound/inbound), 2013-23F # of passengers/seats, Millions Demand Capacity Demand projection1 Capacity Projection2 Demand/ca pacity ratio X% 1 Based on Euromonitor, IATA and GDP growth prediction

14、2 Based on aircraft order, assuming rented /owned ratio remains unchanged 1619F 943 485 201321F1714 713 15 463 20F1822F 694 2023F 387 414 531 813 579 509 875 636 753 580 640 781 833 923 1,035 1,135 1,236 80%72%77%79%82%83%82%81%80%78%80% +11% p.a +10% p.a +8% p.a +10% p.a Exhibit 2 Looking forward,

15、supply is likely to grow faster than demand in China 4How Chinese airlines can brace for impending turbulence From 2008 to 2017, the Civil Aviation Admin- istration of Chinas (CAAC) position on new entrants, including LCCs, seesawed. In 2014, the CAAC loosened regulations for starting new airlines.

16、This led to the proliferation of start-up carriers, including Jiuyuan Airlines, Loong Air, and Donghai Airlines. Later, in 2016, CAAC retightened control over new carriers by restricting license issuance, limiting slots allocated to new entrants, and holding back approvals for new aircraft pur- chas

17、es. Ultimately, these moves benefitted the Big Three. CAAC has also historically prevented direct competition on international routes by restricting traffic rights on these routes to a single Chinese carrier. The market used to have price limits (fares were allowed to float between 25 percent above

18、and 45 percent below the standard regulated price). Tightly controlled rules on ancillaries deterred prod- uct innovation and hampered LCC growth. Today, the CAAC is cautiously relaxing its stance to encourage more competition. It has already removed regulated pricing on 375 domestic routes and will

19、 open up a further 302 routes, including the major business route from Beijing to Shanghai, for market- based pricing. It is also easing its restriction of one carrier per long-haul route. Most notably, restraints on airport terminals and slot capacity that have hindered growth will ease. Chief amon

20、g these is the new Beijing Daxing airport, which opened at the end of September 2019. Daxing is expected to serve 72 million passengers per year by 2025 and 100 million passengers per year by 2040, doubling capacity in Beijing. All of the Big Three and the fourth-place Hainan Airlines are set to com

21、pete with large-scale hubs in the Beijing market. The combination of excess capacity, intensi- fied competition, and pricing pressures may result in increasing economic losses if Chi- nese carriers continue a business-as-usual approach. How Chinese airlines can brace for impending turbulence 5 Its n

22、ot too late for incumbent Chinese airlines to change course. Five actions can help them effectively navigate the coming turbulence. Improve productivity and tightly manage costs As of 2018, Chinese carriers overall unit cost (the cost per available seat-kilometer, or CASK) was low compared with glob

23、al peers apart from two cost categorieslabor and aircraft ownership (Exhibit 3). In 2018, the Big Threes staff CASK was slightly higher than Singapore Airlines, despite enjoying much lower labor rates in China. And air- craft ownership costs 60 percent more for Chinese carriers than for those in the

24、 United States. SOURCE: The Airline Analyst; annual reports Unadjusted CASK by cost category, 2018 USD cent 0.50.50.5 1.8 0.40.4 0.4 2.0 2.0 2.0 1.5 2.0 2.0 1.3 1.3 1.2 1.0 1.2 2.7 1.5 1.3 1.0 0.7 1.4 1.2 1.2 1.0 0.7 0.9 0.7 0.2 0.4 0.2 8.3 Singapore 0.1 0.2 Air China 0.2 China Eastern 6.7 China Sou

25、thern 0.2 0.1 6.6 4.6 Spring 0.3 0.4 0.3 0.3 US average 6.7 6.4 Aircraft ownershipStaff Marketing strategic use of connecting O most inter- national carriers would provide all boarding passes at the first check-in. Transfer desks and channels for transfer passengers dont exist in many Chinese airpor

26、ts, and, where they do, they are often closed. While pursuing these opportunities, Chinese carriers need to balance network presence and profitability on international routes. Local and national governments encourage Chinese carriers to expand internationally. The pace of international expansion has

27、 ac- celerated with the introduction of One Belt, One Road policies. Local governments are especially keen to achieve international con- nectivity, which has led to the launch of niche routes such as Shenzhen to Seattle and Chengdu to Helsinki. Even with subsidies, these routes are hard to make prof

28、itable. For flights that are strategically important but unprofitable, carriers should improve loads by capturing more connecting traffic and reducing capacity with new long-range, nar- row-body aircraft. Carriers can also explore cost-effective code-share partnerships with other carriers to support

29、 these opportunities. Consolidateboth domestically and internationally Despite individual efforts, the Chinese airline market will eventually require capacity con- solidation. Since government deregulation in 2014, the growth of smaller players and new entrants has led to increased market fragmentat

30、ion in China, with the Big Threes capacity share decreasing from 54 percent to 46 percent. This fragmentation contrasts starkly against other geographies that have higher levels of consolidation. The US airlines market, for example, went through a long process of consolidation; today, around 60 perc

31、ent of US capacity is concentrated among American Airlines, Delta Airlines, and United Airlines, the top three carriers. Only 12 US airlines operate internationally, com- pared with 29 Chinese carriers. As in the US, consolidation in the Chinese market will likely take time and will require regulato

32、ry support. Chinese carriers have already started build- ing global partnerships through network joint ventures (JVs): China Eastern has JVs with Qantas and Japan Airlines, Air China with Lufthansa, China Southern with Air France KLM. Such partnerships help the airlines expand their networks, and Ch

33、inese carriers should continue building global cooperation. Chinese carriers can be more proactive in international consolidation as well. Today, some have either taken or been the recipi- ent of foreign airline minority investment. For example, Delta owns 3.22 percent of China Eastern, which in tur

34、n owns 10.3 percent of Air France KLM overall.7 Such minority equity 6Source: Paxis by IATA. 7Delta owns 3.22% of China Eastern, Delta and China Eastern both own 10% of Air France KLM respectively. How Chinese airlines can brace for impending turbulence 9 Steve Saxon is a partner in McKinseys Shenzh

35、en office and leads the companys airline practice in Asia. Qiao Xie is an associate partner in the Beijing office, Zhi Wei Sok is a consultant in the Singapore office, and Zi Chen is a researcher in the Shanghai office. stakes help cement the JVs. But beyond pas- sive minority stakes, Chinese carrie

36、rs could seek more control in international airlines. Such activities could be financially advanta- geous and help improve Chinese carriers standing in the international market, aligning with One Belt, One Road initiatives. We are at an inflection point in the Chinese aviation market. The next few y

37、ears may be challenging, with excess supply and looser regulations leading to greater competition. But by pursuing the five measures above, Chinese carriers will be better equipped to steer through the turbulence. How Chinese airlines can brace for impending turbulence October 2019 Copyright McKinsey & Company Designed by GCO NewMedia