It’s not Beijing. No, China’s largest airline market is Shanghai, a city with not one but two of the world’s top 50 airports by traffic.
Sure enough, Beijing’s main airport stands out as the world’s second busiest behind Atlanta. Add about 6m passengers from the city’s smallish Nanyuan airport, and China’s capital is now part of an elite group of global cities serving more than 100m airline passengers annually. But Shanghai? Its two airports — Pudong and Hongqiao — combined to handle almost 118m passengers in 2018. Only three cities—London, New York and Tokyo—handled more.
Shanghai’s airports have come a long way since 2010, when they welcomed just 72m. One year earlier, in the depths of the global financial crisis, the figure was just 57m, less than half last year’s total. The fiery pace of growth seen earlier this decade has slowed for sure, with traffic up just 5% last year. But just as interesting as Shanghai’s growth story is its competitive landscape. This year, Beijing will get the spotlight as it prepares to open a giant new airport, promising to produce some epic competitive battles. The battles for Shanghai, however, will be at least as intense, and have been all decade.
The city’s top airline is China Eastern, together with its wholly-owned subsidiary Shanghai Airlines, acquired 10 years ago. But far from dominating the city in the same way that, say, Delta dominates Atlanta, China Eastern shares the Shanghai market with multiple competitors big and small.
That helps explain its long history of financial under-performance relative to China Southern and especially Air China, the latter protected until now by severe airport capacity constraints at its Beijing hub. Every year from 2012 through 2017, China Eastern’s operating margins were lower than those of its Big Three peers. Only in 2018 did it show signs of perhaps pulling past China Southern (fourth quarter results are still pending)…
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