Air China

Not to be confused with China Airlines, the national airline of the Republic of China (Taiwan).

Air China
中国国际航空公司
Zhōngguó Guójì Hángkōng Gōngsī IATA
CA ICAO
CCA Callsign
AIR CHINA Founded 1988 Hubs

Frequent flyer program Air China Companionor Phoenix Miles Member loungeVIP Lounge Alliance Star AllianceFleet size 229 (+82 orders) incl. cargo Destinations 185 Parent companyChina National Aviation Holding Company Headquarters Beijing, ChinaKey people Li Jiaxiang, Chairman
Cai Jianjiang, PresidentWebsite: www.airchina.com.cn

Air China Ltd (SEHK: 0753, LSE: AIRC, SSE: 601111) (simplified Chinese: 中国国际航空公司, Pinyin: Zhōngguó Guójì Hángkōng Gōngsī, literally "Chinese International Aviation Company", abbreviated 国航) is the People's Republic of China's state owned and second-largest commercial airline after China Southern Airlines. It is the flag carrier and the only airline to fly the national flag on its entire fleet. Its logo consists of a phoenix in the form of the acronym VIP, and "Air China" in both English and Chinese, which was autographed by Deng Xiaoping. It operates 5,090 flights each week worldwide and is also the 18th largest airline in the world by fleet size.

Air China's main hubs are Beijing Capital International Airport, Chengdu Shuangliu International Airport and Shanghai Pudong International Airport, with other focus cities at Hangzhou Xiaoshan International Airport, Chongqing Jiangbei International Airport, Tianjin Binhai International Airport and Hohhot Baita International Airport.[1] Out of all Asian airlines, Air China currently flies to approximately 120 destinations; the most destinations from its own Beijing hub.

The airline flew 33.97 million passengers in 2006, with a passenger load factor of 75.9%. In the same year, it made a profit of 2.7 billion yuan, with an operating revenue of 44.9 billion yuan and total expenses standing at 42.4 billion yuan.[2]

It is the 4th largest airline in Asia, 5th largest in the world in terms of domestic cargo traffic and 17th largest airline in the world by terms of fleet size.

On June 20, 2007, Air China was ranked 461 out of the Worlds Top 500 Brands, an accolade in which Air China is the only airline known to be on the top 500.[3]

1 History
2 Operations
3 Subsidiaries
4 Financial performance
5 Destinations
6 Fleet
7 Codeshare agreements
- 7.1 Former codeshare agreements
8 Air China Companion
- 8.1 Partners
9 Incidents and accidents
10 See also
11 References
12 External links
- 12.1 Profiles

History

An Air China A340 departing from Shanghai Pudong International Airport

Air China was established on July 1, 1988. Its formation was a result of the government's decision to split the operating divisions of Civil Aviation Administration of China (CAAC) into separate airlines. [4] The CAAC was restructured in late 1987 and divided into six airlines, namely Air China, China Eastern, China Southern, China Northern, China Southwest, and China Northwest. Air China, based in Beijing, was given chief responsibility for intercontinental flights, and took over the CAAC's long haul aircraft (Boeing 747s, 767s, and 707s, as well as medium-haul 737s) and routes when it was granted its autonomy on July 1, 1988.

At the time of its launch 1988, Air China had 6,000 employees and served 31 international and 30 domestic destinations. It was China's largest airline company and the national flag carrier. In 1989, Air China posted a net profit of $106 million on revenues of $383 million. In that same year, Air China entered a joint venture with Lufthansa, which provided 40 percent of the capital, or $220 million, to create the Beijing Aircraft Maintenance Center (Ameco Beijing). It specialized in the upkeep of the Boeing aircraft that comprised Air China's fleet.[5] The venture was expanded with another $218 million (¥1.2 billion) in 1992. Ameco Beijing employed nearly 4,000 people, a little fewer than 50 of them from Lufthansa.[6] Air Transport World reported the company preferred to source its needs through joint ventures due to the country's lack of hard currency.[7] Its Beijing Air Catering was 40 percent owned by a large Hong Kong caterer.[8]

Air China terminal (Beijing Hub) at Beijing Capital International Airport on a day of hazy smog (background)

Operating revenues for Air China were $1.05 billion in 1994, producing a net income of $36 million.[9] Further deregulation of the aviation business took place in 1994, enabling foreign investment in airports and facilitating the import of aircraft built outside mainland China.[10] By 1996 the country had 108 airports with scheduled airline services and around 30 different airlines. In 1997, the airline reported sales of $1.38 billion (¥11.5 billion). The fleet had grown to 65 aircraft and the carrier was flying 144 routes overall. By October 1997, Air China was planning a public stock offering.[11] China Eastern Airlines and China Southern Airlines had listed on the Hong Kong and New York exchanges earlier in the year. Air China delayed plans based due to poor financial performance and a downturn in business caused by the Asian financial crisis. About 16 million passengers flew Air China in 1998.

Rumors of a state-prompted merger between Air China and China Southern Airlines abounded in 1999.[12] By this time, China Southern, based in the commercial center of Guangzhou, had become the country's largest carrier. At the time, China had 30 airlines, and Beijing wanted to group them into several, more globally competitive units. Altogether, mainland airlines lost more than ¥6 billion in 1998. Flight International observed that a merger with China Southern could give Air China access to the Hong Kong and New York stock markets.

Air China Boeing 737-800 painted with Beijing 2008 Summer Olympics livery at Beijing Capital International Airport

The October 1999 opening of a new terminal (Beijing Hub) at Beijing Capital International Airport, where Air China operated the vast majority of flights, promised not only to relieve travelers of cramped conditions but also to allow Air China to devote more resources to its lucrative ground handling business for international carriers. One-fifth of Air China's 15,000 employees worked in ground handling.[13]

Although the Chinese aviation industry as a whole was expected to earn ¥1 billion ($120 million) in profits in 1999, Air China and other individual airlines were struggling to break even and mitigate their collective losses of 1998, which totaled $300 million. Air China was not publicly traded and was not quite as open with its own sales figures as China Eastern and China Southern.

To demonstrate the airline's faith in its Y2K preparations, Air China chief Wang Li'an and several other top officers personally piloted several flights at the turn of the millennium. As reported in the China Daily, this decision generated a considerable amount of positive publicity in China. Wang had worked for the CAAC for more than 40 years before being appointed Air China's director-general in early 1999.[14]

Early in 2000, Air China teamed with China National Aviation Co. Group (CNAC), the CAAC's Hong Kong-listed commercial arm, to establish a Hong Kong branch (95% owned by Air China). Direct flights to London from Hong Kong soon began. Air China faced competition at its home base from Air France, which increased its four flights a week to Beijing, begun in 1997, to daily service. British Airways also wanted to increase its frequencies (it was operating 18 flights a week to China).[15]

In mid-2000, the CAAC repeated earlier calls for a consolidation of the ten airlines it controlled into three.[16] (Air China, China Southern, and China Eastern were to each acquire the smaller airlines.) Apart from the ten CAAC airlines, there were another 24 smaller carriers that had been formed by provincial or private interests.)[17] Price wars had proved so destructive that the government banned discounting.[18] However, no deadlines or plans for financial support for ailing carriers were made.[19] To aggravate the airlines' financial troubles, the CAAC blocked a proposed merger in September 2000 between Air China and China Southern on anti-competitive grounds.[20]

In January 2001, the CAAC's ten airlines announced they had agreed on a merger plan.[21] Air China was to acquire China Southwest Airlines and China International Airlines, the country's fourth strongest domestic airline. This was to create a group with assets of ¥56 billion (HK$ 52.5 billion), including 118 aircraft.[22] On October 28, 2002, Air China consolidated with China National Aviation Corporation and China Southwest Airlines.

During 2004 as part of a consolidation of the Chinese aviation industry, Air China absorbed Zhejiang Airlines (a subsidiary of CNAC). On 15 December 2004 the company listed its shares on the Hong Kong and London Stock Exchanges. Air China has shareholdings in Air China Cargo (51%), Air Macau (51%) and also holds majority shares of Shandong Airlines.

In March 2005, Air China was in talks with Swire Group, the largest shareholder of Cathay Pacific, for talks with Air China acquiring Cathay Pacific, and Cathay Pacific acquiring a majority stake of Dragonair. In return, the Swire Group would become the largest individual shareholder of Air China's parent company. Both airlines subsequently announced that the airlines will not merge completely in the foreseeable future, and Swire expressed its commitment in remaining as the largest shareholder of Cathay Pacific. It was also announced that Air China would cooperate with Cathay Pacific by codesharing flights in late 2005, and would partner with Asia Miles in the second-half of 2005.

As of January 2005, Air China is owned by China National Aviation Holding Company (CNAH) (69%), public floatation (21%) and Cathay Pacific (10%). On May 22, 2006, Air China signed an agreement with Lufthansa and was officially invited to join Star Alliance, a rival airline alliance of Oneworld, of which Cathay Pacific is a member. A few days later on June 9, 2006, a joint announcement revealed a new shareholding structure in which Air China will acquire a 17.5% stake in Cathay Pacific, while the latter will own 20% of the former.

There are still ongoing plans for Air China to acquire a stake of China Eastern Airlines and to expand its presence at Shanghai.

Operations

Air China operates in four segments:[23]

Airline Operations segment, which comprises the provision of air passenger and air cargo services;
Engineering Services segment, providing aircraft engineering services, such as aircraft maintenance, repair and overhaul services;
Airport Terminal Services segment, offering ground services that include check-in services, boarding services, premium class lounge services, ramp services, luggage handling services, loading and unloading services, cabin cleaning and transit services,
Others segment, which comprises the provision of air catering services and other airline-related services.

Subsidiaries

Air China Cargo, flight logistics company
Air China Business Jet, business jet company

Financial performance

For fiscal year ending December, 2006:

Sales: $5,747.4M
One year growth: 21.1%
Net income: $422.7M
Income growth: 38.1%

Destinations

An Air China Airbus A330-200 in Star Alliance livery, landing at Vancouver International Airport

Main article: Air China destinations

In the past, it has operated a Beijing-San Francisco-New York Service but it was replaced with non-stop Beijing-New York service after several trials of flying over the north pole, cutting the time by 3 hours. In the past, Air China operated service to Berlin, Belgrade, Istanbul, Manila, Nagasaki, Seattle and Zurich from Beijing but later discontinued in the mid 1990's. Copenhagen service was discontinued in 2002 (currently operated by SAS), Vienna service was discontinued in 2005 and it is currently operated by Austrian Airlines (although Austrian discontinued service to Shanghai in 2007). The Beijing-Milan sector had been discontinued in 2005 after increasing capacity on the Beijing-Rome routes. However, services to Berlin, Istanbul, Milan, Vienna, and Zurich are set to restart between 2008 and 2009. Air China also operated a Beijing-Guangzhou-Melbourne-Sydney-Guangzhou-Beijing trip, operated by a Boeing 777-200 but due to the range of the new Airbus A330-200 and also increasing capacity on the other Beijing-Shanghai-Melbourne/Sydney routes, which were upgraded in December 2006. The Guangzhou hub was also taken off.

Today, Air China is increasing its international presence, starting service on 13 new routes between 2008/9. Recently, Air China has upgraded service to Vancouver to A330-200. After the launch of the new Beijing-Dubai-Athens route, it is considering upgrading the route with A330-200. Service to Warsaw, Poland nonstop from Beijing will be historic, as Air China will be the first international airline to opearte long haul flights to Warsaw, besides LOT, although it will compete with it's partner from the alliance(Star Alliance) on the route, 7x per week instead of LOT's 3x per week (end June 2008).

As of December 1, 2007, Air China began flying non-stop from Beijing to Australia. In the past, all of the routes stopped at Shanghai/Guangzhou and then continued to Melbourne/Sydney. Air China delinked Sydney from Melbourne to offer a direct Beijing-Shanghai-Melbourne. Beijing-Shanghai-Sydney was reduced from daily to 4 times weekly.[24] In the past, the service between Australia and China have been operated by Boeing 747-400, Boeing 777-200 and Boeing 767-300ER.

On December 10, 2006, it made its first flight to São Paulo (via Madrid), which became its first South American destination. The service began with the Boeing 767-300 aircraft but because of its popularity, the service has been upgraded to A330-200. This is currently Air China's longest route.

Once more A330's are being delivered, then the Boeing 747-400's will be deployed to North American routes, with Los Angeles, to add 2nd daily service. The A330's will be used on European services, as well as Vancouver, São Paulo and Australia. According to a speech, it is known that Air China will be ordering 15 Boeing 777-300ER's, but the date of delivery is unknown. These aircraft will be used for further expansion of routes to North America and Europe.

Routes to Australia, Frankfurt, Madrid and São Paulo currently operated by Airbus A330-200 may be replaced by Boeing 787 Dreamliners. The Boeing 787 Dreamliners will be used on flights to Toronto and Washington, D.C. when they are launched.

Air China is launching many flights to cities in Europe, as it believes these services will become very popular in the coming years. The airline has already stated they are happy to make losses on these routes at first, but hopefully they will build up a good brand image in Europe, so as to make them a premier choice for those flying to China.

Fleet

Passenger

As of May 2008, Air China fleet includes the following aircraft:

Air China Fleet Aircraft Total Passengers
(First/Business/Ecomomy) Routes Notes Airbus A319-10033
(2 orders) 128 (8/120) Domestic, Asia Airbus A320-2006 164 (8/156) Domestic, Asia Airbus A321-2003
(21 orders) 185 (16/169) Domestic Airbus A330-20016
(4 orders) 283 (12/271)
240 (36/215) Domestic, Sydney, Melbourne, Frankfurt,
Paris, Vancouver, São Paulo , Madrid, Hongkong Features new business class
Two in Star Alliance Livery (B-6091, B-6093) Airbus A340-3006 255 (8/28/219) Domestic, Rome, Milan, Frankfurt, London-Heathrow Features new first and business class Boeing 737-30041 128 (8/120) Domestic, Asia Boeing 737-6006 110 (8/102) Domestic Boeing 737-70020 126 (8/118) Domestic, Asia Boeing 737-80040
(20 orders) 167 (8/159) Domestic, Asia B-5176 in Olympic livery Boeing 747-4004 344 (10/42/292)
346 (10/42/294) Domestic, Shanghai, New York-JFK Features new first and business class Boeing 747-400M8 307 (18/40/249)
280 (10/24/246) Los Angeles, San Francisco, Paris-CDG, Rome-Fiuminicino, Frankfurt Being retrofitted to feature new first and business class Boeing 757-20012 200 (8/192) 201 (8/193) Domestic, Asia Boeing 767-200ER3 214 (18/196) Domestic, Dubai, Busan Boeing 767-3003 225 (10/26/189) Southeast Asia Boeing 767-300ER3 225 (10/26/189) Munich, Stockholm, Dubai, Athens Boeing 777-20010 345 (49/296)
314 (12/49/253) Domestic, Seoul-Incheon, Tokyo-Narita, Singapore, Munich, Moscow Boeing 777-300ER(15 orders)[1]Entry into Service: Unknown Boeing 787-8(15 orders) Entry into service: 2009

Cargo

Aircraft orders

Air China has signed agreements with:

Airbus, on July 21, 2005, for the purchase of 20 Trent 700 powered Airbus A330-200 aircraft, scheduled for delivery from May 2006.
Boeing, on August 8, 2005, for the purchase of 15 Boeing 787 aircraft for delivery from mid-2008 to end 2010. Sources also report that Air China may even become the 2nd carrier to take delivery of the Boeing 787-8, shortly after All Nippon Airways.
Airbus, on June 2006, for the purchase of 24 Airbus A320s. These aircraft are to be delivered between 2007 and 2010. However, Air China has no plans to order the Airbus A380 in their fleet, because they think that it just makes more sense by using one kind of Jumbo jet. Before, Airbus has stated that Air China were to be the next few customers to order the A380, however, it may order the A380 superjumbo since they did not have a plan to rule out purchases of the big Airbus plane in the future.

While Boeing's orders page for 2006 reflects this order, there have been no formal news releases indicating the following:

Boeing, on January 17, 2006, for the purchase of 10 Boeing 737-800 aircraft for delivery from end 2007 to end 2008.

Previously operated

Passenger Fleet:

Antonov An-12 (1988 – 1997)
Boeing 707 (1988 – 1996)
Boeing 747SP (1988 – 1999)
BAe 146 (1992 – 2003)
Hawker Siddeley Trident (1988 – 1994)
Tupolev Tu-154B (1988 – 1997)
Xian Y-7 (1989 – 1996)

Cargo Fleet:

Lockheed L-100 Hercules (1988 – 2001)

Codeshare agreements

Air China's B757-200 plane with the new Star Alliance logo, seen at Beijing Capital International Airport in December, 2007

Air China officially joined Star Alliance on December 12, 2007. This move greatly expanded the Alliance's presence in China.

With the Alliance's "Under One Roof" initiative, all Star Alliance members have moved their operation to the Terminal 3 of the Beijing Capital International Airport, Air China's main international hub. This new terminal is divided into 3 sections, with T3C housing all domestic flights operated by Air China and Shanghai Airlines and T3E housing all Star Alliance international flights. The two sections are connected by a high-speed inter-terminal train.

As of April 2008, Air China had codeshare agreements with the following airlines:

Air Canada(SA)
Air Macau
Air New Zealand(SA)
Alitalia
All Nippon Airways (ANA)(SA)
Asiana Airlines(SA)
Austrian Airlines(SA)
Avianca
British Airways
Cathay Pacific Airways
China Eastern Airlines
China Southern Airlines
Continental Airlines
Dragonair
Finnair, flights operated by Finnair
Korean Air
Kuwait Airways, flights operated by Air China on the Kuwait-Karachi-Beijing route
LOT Polish Airlines(SA)
Lufthansa(SA)
Qatar Airways, all routes operated by Qatar Airways
Scandinavian Airlines System (SAS)(SA)
Shandong Airlines(Air China subsidiary)
Shanghai Airlines(SA)
Turkish Airlines(SA)
United Airlines(SA)
Virgin Atlantic Airways

Former codeshare agreements

Northwest Airlines (began 1996, terminated in 2002): Detroit to Beijing and Shanghai (operated by Northwest Airlines). After NWA terminated non-stop flights to China, Air China decided to terminate the codeshare between the two airlines.
Qantas (began 2006, terminated 2008): Blocked Codeshare on Qantas' Beijing-Sydney route. After Air China initiated non-stop Beijing-Sydney service, Air China has terminated the Qantas Codeshare.
Varig (suspended in 2006 due to collapse): Beijing to Frankfurt (operated by Air China) and Frankfurt to São Paulo (operated by Varig). However, Air China itself began flying to São Paulo via Madrid in December 2006.

Air China Companion

Air China lounge (next to the bamboos) at Terminal 3 of Beijing Capital International Airport, the airline's main hub

Air China Companion is the frequent flyer program for Air China. This is the first frequent flyer program to be launched in China. It was designed to allow frequent flyers travelling internationally and domestically with Air China and its partner airlines.[26]

Members earn accumulated mileage points for awarded tickets on Air China and other partner flights. There are flight mileages and partner mileages. Flight mileages are for members flying with Air China while partner mileages are for members taking Partner Airlines of Air China. The companion card may be upgraded to VIP status. There are special redemption rates for VIP members – Gold card members and Platinum card Members.

Gold card members: members will earn 25% mileage bonus on credited flight mileage.
Platinum card members: members will earn 50% mileage bonus on credited flight mileage.

Partners

In addition to its Star Alliance partners, Air China has frequent flyer partnerships with the following airlines:

Air China has reportedly outsourced their frequent flyer program and attempts to turn it into a profit center have resulted in what some believe to be a substandard program. For example, all miles expire periodically unlike those of many Western airlines (and even some other Chinese airlines). This mean, for example, unless you quickly use your miles instead of saving them for larger awards, thee miles expire after a one or two year period.

Incidents and accidents

On April 15, 2002, Flight 129, a Boeing 767-200ER from Beijing to Busan, South Korea, crashed into a hill while trying to land at Gimhae International Airport during inclement weather, killing 128 of the 166 people on board. This is the only accident with fatalities involving Air China.

On March 13, 2005, the right main gear wheels of an Air China Boeing 747-400 at LAX, sank deeply into asphalt at the edge of the taxiway as it turned on to runway 25R for take-off. The aircraft was immobilized and the runway had to be closed for 13 hours before the aircraft could be pulled free.[27]

On January 6, 2007, the left wing of an Air China Boeing 747-400 bound for Beijing clipped the tail section of a Delta Air Lines plane while pushing back from the gate at John F. Kennedy International Airport, New York. No injuries were initially reported among the 215 passengers or 23 crew members aboard the Air China plane, the Delta Air Lines aircraft was empty of passengers at the time. This incident is under investigation by the US Federal Aviation Administration.

On July 1, 2007, the nose gear of an Air China Boeing 767-200ER was accidentally retracted while the aircraft was at a gate at Beijing Capital International Airport. There were 2 injuries onboard and no fatalities.[28]

References

^ Introduction of Air China
^ Channel News Asia – Air China stats
^ Air China: one of the World’s 500 Most Influential Brands – China Economic Review
^ "Directory: World Airlines", Flight International, 2007-03-27, p. 55.
^ "Air China Launches New Service, Works on Image," USA Today, October 9, 1991, p. 8B.
^ Bangsberg, P.T., "Lufthansa, China Plan More Funds for Aircraft Maintenance Venture," Journal of Commerce, June 24, 1992, p. 2B.
^ Vandyk, Anthony, "Air China: New Name, New Heights," Air Transport World, February 1991, p. 54.
^ Flynn, Ann Amelia, "China's Airlines Take Wing," China Business Review (Washington), May/June 1993, p. 14.
^ Bradbury, Nicholas, "Troubled But Hopeful," Asset Finance & Leasing Digest, June 1994, p. 23.
^ "Air China to Stand Alone," Airfinance Journal, March 1995, p. 8.
^ Harding, James, "Air China Plans Overseas Float," Financial Times (London), October 15, 1997.
^ Chan, Christine, "Link-Up Possible Between Mainland Flagship and Southern Airline; Rumours Fly of Giant Merger," South China Morning Post, Bus. Sec., July 9, 1999, p. 4.
^ "Rise of the Phoenix," Ground Handling International, July 1999, p. 55.
^ "China: Person of the Week; Making the Trans-Millennium Flight, Wang Creates a Marketable Image," China Daily, December 12, 1999, p. 8.
^ Lo, Joseph, "Star Alliance Beckons Air China," South China Morning Post, Bus. Sec., May 24, 2001, p. 2.
^ Chang, Leslie, "China Intends to Merge 10 Airlines Into Three," Wall Street Journal, July 24, 2000, p. A21.
^ "Ten Chinese Airlines Prepare for Takeoff of Mergers, Alliances," China Online, January 11, 2001.
^ "It's a Jungle Up There: China Tries to Tame Its Unruly Aviation Sector," ChinaOnline, October 25, 2000.
^ McGregor, Richard, "Call for Mergers Leaves Chinese Carriers Up in the Air," Financial Times (London), August 1, 2000.
^ "CAAC Blocks China Southern Merger with Air China," AFX-Asia, September 28, 2000.
^ Ng, Eric, "Air China Set to Announce Lead Bank for Listing," South China Morning Post, Bus. Sec., July 16, 2001, p. 4.
^ Holland, Tom, "China Break-In," Far Eastern Economic Review, October 25, 2001, p. 41.
^ Air China Ltd 0753.HK (Hong Kong) Reuters.com
^ Air China strengthens position as carrier of choice between Australia & China October 10, 2007
^ Air China fleet age
^ "Air China Companion" – about us
^ Flight International, July 2005
^ Photo: Air China, Boeing 767-2J6/ER, Beijing – Capital (PEK / ZBAA), China, July 1, 2007, B-2553 (cn 23744/155) Nose landing gear was accidentally retracted during boarding at gate 209. Two people were injured on board.