Hainan Airlines Bullish on International Travel from China’s Lower-Tier Cities

Hainan Airlines, China’s fourth-largest airline and largest private airline, remains bullish on global Chinese travel in 2017 and will launch 10 new flights to international destinations. This follows a similarly bullish view on the Chinese tourism market in 2016, when it also launched 10 new international flights.

While some international carriers may be struggling to establish new routes to China, Chinese airlines are facing fewer hurdles and are confident in their expansion efforts.

Hainan Airlines, which faces competition from China’s three dominant state-owned carriers, is primarily focused on connecting what it calls “first-tier Chinese cities and second-tier foreign cities,” as well as “second-tier Chinese cities and top-tier foreign cities”—avoiding taking on state-owned carriers on the most competitive routes. It employed the same strategy in 2016, when it launched routes such as Xi’an-Sydney, Beijing-Calgary, as well as Beijing-Las Vegas.

It remains unclear exactly what routes Hainan Airlines intend to establish in 2017, but among the already announced routes are two additional flights to Los Angeles from the second-tier cities of Chengdu and Chongqing. This would mark the first international flight Hainan Airlines runs from Chengdu, and the second international route it launches from Chongqing. It’s only current route to Los Angeles is from another second-tier Chinese city, Changsha.

Meanwhile, Hainan Airlines has yet to announce any new flights along the most trafficked international routes from China. While accounting for a majority of global Chinese travel, flights on such routes face increasingly stiff competition, both from China’s state-owned carriers, Gulf carriers, other international carriers, as well as a growing number of flights operated by budget carriers. Instead, Hainan Airlines seems to be tapping into what is predicted to be the biggest source of future tourism growth: China’s lower-tier cities.

Just a week ago, Hainan Airlines also completed the acquisition of an additional 48.2 percent stake in another Chinese private-owned airline, Tianjin Airlines, bringing its total stake in the company to 87.3 percent. Similar to Hainan Airlines, Tianjin Airlines serves numerous routes between lower-tier Chinese cities and international destinations. Among the flights it offers are Tianjin-Chongqing-London, Tianjin-Moscow, and Tianjin-Chongqing-Auckland—all connecting lower-tier cities with popular overseas destinations. Following Hainan Airlines’ lead, Tianjin Airlines is also set to expand its route network with additional flights following the same strategy in 2017. Some of the new routes it has announced for 2017 are Xi’an-London and Tianjin-Paris.

Both with its expansion efforts and its acquisitions, it seems clear that Hainan Airlines views China’s lower-tier cities as the next frontier for global Chinese travel.

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Transportation, Travel