China is key O
n March 27 KLM will launch its seventh direct service from Amsterdam’s Schipol Airport to a Chinese city. The city is Xiamen, and KLM will again be the fi rst airline to offer direct fl ights between Europe and Xiamen. KLM is a major operator from Europe to China with 43 weekly fl ights. The Xiamen service follows the launch of three weekly fl ights to Hangzhou last May and twice weekly service to Chengdu in 2006. The question is – why is KLM so focused on China?
Fast growing cities
When you take a closer look at the destinations, it becomes increasingly clear where the answer lies. Xiamen, which will be served by a B777-200ER in a two-class confi guration (283 in economy, 35 in business), was one of China’s fi rst Special Economic Zones (SEZ). It is one of China’s fastest growing cities with massive foreign direct investment (US$2.2 billion), a huge number of industries including fi nancial services, shipbuilding and telecoms; and is the city with the fastest growing GDP in China at more than 20% year-on-year. Hangzhou is also served by a B777-200ER in the same confi guration. The city is the capital of the province of Zhejiang, which together with the neighbouring province of Fujian, has 80 million people.
Like Xiamen it has a rapidly growing
economy, a large manufacturing base and after Guangzhou has the largest GDP of all of China’s provincial capitals. It is also just 180km from Shanghai.
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Chengdu is one of the most important economic centres and a transportation and communication hub for western China. It is regarded as one of the top 10 cities in which to invest out of 280 urban centres in China.
The other common factor that all these Chinese cities have is that they all have fast-growing tourism sectors.
Focused on growth centres It is clear there are a number of unifying themes here, and KLM is keen to tap into that economic success, as Pieter Bootsma, senior vice president of pricing & revenue management, explains: “China is the fastest growing economic market in the world. We want to take a share of that growth. In terms of competitive advantage, some sort of ‘fi rst mover’ advantage is what we are also trying to achieve.” It defi nitely helps to be the
fi rst European airline in a growing city, as KLM’s experience with Chengdu proves.
“A few years ago when we looked at Chengdu I think the feeling was that this was an interesting market for KLM to go into,” he says. “We looked at all the new factories opening up and we saw the industrial development all going west.”
As a result, the KLM fl ights into Chengdu carry a combination of cargo and passenger traffi c. The growth of tourism with both domestic and foreign visitors has also led to an interesting passenger mix.
KLM has announced plans to directly serve its seventh city in China – Adam Coulter looks at what is driving the airline’s expansion in the Asian powerhouse.
Chengdu, for example, is the capital of the Sichuan province in south west China, and is best known as the place to see giant pandas.
As a result, Bootsma explains, there is more leisure traffi c on the route than business.
In the case of Chengdu, sales are split half and half: with 50% of ticket purchases originating in China and 50% from Europe.
In Xiamen the emphasis is more on business.
China’s urban expansion There are now more than 220 cities in China with more than one million people. Add that to China’s burgeoning middle class, which is estimated as 25 million people a year, and it is clear it has fuelled a massive growth in domestic airline expansion. So much in fact that China’s high load factors on domestic airlines have hit record highs, on average surpassing the 80% mark.
Capacity growth in China is now forecast to increase by 12% throughout this year, as reported in Routes News (Issue 4 Volume 6) last year. Even with KLM’s seventh direct China route, that still leaves hundreds of Chinese cities without a direct fl ight to Europe – will KLM launch another next year?
Bootsma ruled this out. “Our people in China are looking for new routes all the time, but to be honest we have launched these three routes in a relatively short time frame. We may move, for example, from three times a week to potentially
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