Prepare for Chinese Air Service

Feb. 16, 2017
Chinese air service is expected to grow substantially in the near future, but preparing for it means knowing your facilities and capabilities.

On Dec. 2, Hainan Airlines began mainland China service to McCarran International Airport (LAS), becoming the first carrier to offer direct flights from that country to Las Vegas with service three times per week from Beijing.

Chris Jones, chief marketing officer for LAS, said the airport is pursuing service from other Chinese cities as well because leaders believe there’s a ripe market for outbound travel from that country.

Because LAS isn’t a mainline hub airport, Jones said it’s unlikely a mainline carrier like United Airlines, Delta Air Lines or American Airlines will ever put a direct China to Las Vegas flight in service. Because of that, the airport is pursuing the Chinese carriers.

There are also a restriction on the number of flights that can come from Tier 1 cities — Beijing, Guangzhou and Shanghai — due to a bilateral agreement with the U.S. LAS is having the conversations now about the possible Tier 2 cities in China not subject to the same restrictions that could be a good fit for air service.

Though classified as Tier 2 cities, Jones said many of them still have populations around 10 million people.

“I see cities like Chengdu, I see cities like Chongqing, I see some of the places that are down in the Pearl River Delta that might be within range of service, a lot of which that don’t have any nonstop service to the U.S. right now,” he said. “They have a market for it and they’re clamoring for it as well because they want to get the connectivity to North America, but right now people in those areas have to go through typically Beijing or Guangzhou in order to get here.”

The Market for Chinese Air Service

Vancouver International Airport (YVR) has been one of the leading airports in North America in attracting flights from mainland China in recent years, becoming the largest single destination airport from the country.

Carl Jones, director of air service development for YVR said the airport developed plans for the emerging markets to target the biggest growth potential, such as Asia and Latin America. In January, the airport launched Flight Plan 2037, which updates its master plan to meet the needs.

“It’s no great secret that the whole world and all airports are really focused on China and the growth,” he said. “But having that foresight many years ago to not only focus on the growth out of Beijing, Shanghai and Guangzhou, we’re really preparing for that next wave of growth from these secondary Chinese cities, so we have a Hong Kong marketing office that’s very close and working with the airlines on the opportunities.”

Steve, Martin, senior vice president for InterVISTAS Consulting Inc., said there are huge forces at work in the region as a whole and China in particular will continue to have enormous growth. A lot of the airport clients the company works with are actively engaged in marketing themselves to China.

Chinese tourists spent $229 billion in foreign countries in 2015 according to a study by GfK.

“They would love to have China service,” he said. “In terms of regional and economic development, it’s a tremendous economic engine.”

Marcus Lam, vice president for InterVISTAS Consulting Inc., said China differs from other regions with high traveler growth potential because of the regulations and government agreements. Bilateral agreements between the U.S. and China are some of the strictest in the world, which creates challenges for new flight destinations into the country.

“Because of this regulation, airlines are kind of scratching their heads and saying ‘look, I really want to start a flight into Beijing but for multitude of reasons, I cannot because of government regulation, because of infrastructure, because of timing slots that are available that I want to fly into,” Lam said. “Because of all these kinds of restrictions, a lot of the carriers operating in this space are looking to kind of be very creative in partnerships. If they can’t do it alone, what if they can make a friend, a partner, whether it’s codeshare, whether it’s alliance, whether it’s just interline or joint venture to actually serve that market.

Lam said there are a lot of joint ventures already in place in Asia and absent these joint ventures are most notably the Chinese carriers. United has a joint venture with All Nippon Airways, American has a similar one with JAL. Rumors Korea is working with Delta on another one across the pacific, but none of these are Chinese carriers.

“We know that Air China is already in Star Alliance, we know that China Southern, China Eastern are already in Sky Team, there’s no major Chinese presence in One World if you don’t count Cathay Pacific and Hong Kong for mainland China,” he said.

But is it because of regulation? Or is it an unwillingness to partake in a partnership by the Chinese?

“Anyone can take a guess but there’s no one reason, but we do see movement in this space,” Lam said. “For example, Air China just signed with Lufthansa Group on a joint venture for European traffic into China. We know that Air China is working very closely with Air Canada on a joint venture that is imminent. Not approved yet, but imminent.”

Growth continues in China, so airlines are trying to find ways to connect U.S. airports. Beijing has a new airport scheduled to open within the next two years, so what do airlines do until then? Lam said they certainly won’t sit around waiting for new gates and new spaces to open up so they can bid on them so you will see very creative ways of serving the U.S. China market in this market.

“One of the notable standouts in this space in terms of airlines is the HNA Group, China’s largest private airline. They are very creative. They also operate in this really constrained space and they say ‘you know what? Fine, we’ll start routes that aren’t the most popular, aren’t the biggest,’” he said. “Los Angeles to Changsha is an example. Twice weekly from Los Angeles, but it doesn’t fall under the kind of restrictions that the bilaterals have placed on popular airports like Beijing or Shanghai.

“They’re almost as you’d say, running the carriage ahead of the horse. They’re placing their aircraft there and kind of developing the market in advance of the market being there because they see the growth rates that are so high.”

There’s huge potential for more flights and Chinese travelers heading to U.S. airports, but Lam said there are potential challenges on the horizon. President Donald Trump has spoken about strengthening trade restrictions between the countries, which could hinder flights to mainland China.

“Anecdotally, we know that people are now bypassing the U.S. whenever they can to go to the neighboring countries themselves. Universities are seeing an uptick in student applications into Canada and Mexico from China because the Chinese students may choose to avoid the U.S. in the next four years,” he said. “It’ll take some time for us to statistically back that up, but one hypothesis is because of this new administration’s feelings towards China could really an effect on the demand and the growth we’ve seen in the last few years.”

If political issues to spiral between the U.S. and China in the next few years, it could mean a shift to the Canadian market for Chinese airlines instead. Connecting through large Canadian airports would allow them to bypass any political issues.

“I really see a drop in demand for connections via the U.S.,” Lam said. “I think on top of the current restrictions right now for need a transit visa via the U.S., if the relations sour, then a Beijing to LA to Buenos Aires passenger could very well just travel Beijing to Toronto to Buenos Aires and skip the U.S. altogether.

“Those are the kinds of flows we see. They may not be truly valuable to the airline, but once you have multiple kinds of these on multiple itineraries, you really do see an effect.”

Jones said Vancouver traditionally had an advantage in attracting Chinese air service because of its large Asian population. However, the real area of growth for the airport is building connecting traffic. They’re working to build the facility as a trans-Pacific hub for these flights and identifying key markets it could serve.

“If we forecast out 20 years, the biggest growth rates will be China and Asia and Latin America,” he said. “For us, it’s working with the airlines to look at those opportunities and making sure out hub facility can sustain that.”

Jones said YVR is looking at this path outside of political challenges between the U.S. and China.

While there’s plenty of growth opportunities for U.S. flight from secondary Chinese airports, Lam said it’s not as likely secondary airports will be a good fit for Chinese airlines. United started service from San Francisco International Airport (SFO) to Chengdu and Xian. While they’re growing markets, they’re very different than Beijing or Shanghai.

“I think it’s a reality for large metropolitan centers, definitely very, very far away for the U.S. secondary cities to consider secondary cities in China,” Lam said.

Lam said Chinese carriers will also start looking at connections more between the U.S. and China instead of just origin-destination traffic.

“I know that for example that China Southern is building up its Guangzhou hub to connect passengers from the U.S. onwards to Australia,” he said.

He said U.S. carriers are likely not going to view the Chinese airports as connecting points from the U.S. However, the Chinese carriers will need to consider this more. They’re being very competitive right now with flights ranging around $500 with zero beyond cost, which signals a lot of capacity for the airlines.

“Airports in China now have to also consider their connection facilities,” he said. “They now need to think about stuff like how to transit international to international passengers; do they need Chinese visas, this is why they came up with the 72-hour visa-free rule because the Chinese government has acknowledged that more and more passengers are using China as a transit point, which is a country that’s not known to have a lot of transit passengers. Hong Kong is known to transit a lot of passengers. Taipei is known to transit a lot of passengers, but not Beijing or Shanghai. But more and more of that’s happening because there’s so much capacity in the market.”

What city could be the next Las Vegas? Martin said education is a big draw for Chinese travelers, so areas with a lot of higher education institutions will tend to attract more traffic. They’re also fond of high end destination areas.

“We’re at the point where we can work with airport clients, we can sometimes get down to the zip code level of where the exact Chinese population is,” Martin said. “Then it’s about understanding the area, what kinds of airports they travel through and their travel patterns and what airports are they using if they have multiple to choose from.

“I think you really need an understanding of the Chinese population in your airport tachment.

The current market could also change if ultra-low cost carriers start ranging across the Pacific Ocean. Lam said there is word Lucky Air is interested in entering the U.S. market and the environment is ripe for lower cost carriers to serve the market.

Preparing for Chinese traffic

Jones said servicing the Chinese passengers was built into YVR’s overall customer care program, which includes Chinese signage throughout the terminal, voice announcements and wayfinding to guide them through the facility.

Vancouver also has its Green Coat Program, which uses local residents as volunteers to promote customer service at the airport.

“It’s really looking at ways for wayfinding and making sure guests can interact with our customer service team,” Jones said.

Petr Otoupal, managing director of Simpleway, said the key problem for airports adding more flights from mainland China is the language barrier and making sure passengers will be able to navigate through the terminals and to connecting flights or their destination. He compared it to a North American person traveling to China and then trying to navigate the airport without any English signage.

“If you at it from that perspective, you start thinking from the point ‘what would I need in the passenger terminal to be able to navigate through the airport,’” he said. “Do we need wayfinding signs? Do we need static signs? Do we need it to be in multiple languages? Do we need voice announcements? What is the bare minimum I need and how can I start building off of that?”

Otoupal said the boarding process is an area it’s essential to have multiple languages available for foreign travelers. As a baseline, you need to be able to cover all core operations requirements, like final call, emergencies and irregularities.

“It looks like a lot, but it’s really not that bad,” he said. “Then you build on top of that.”

One of the challenges with announcements is the number of potential languages Chinese passengers may have. There are various dialects of Mandarin and Cantonese as well as other languages present in the region. He said on one project they worked on involved using a form of Mandarin from mainland China, which was recognized as Mandarin, except in one area of the country.

Otoupal compared it to challenges with English, where it’s different for speakers in Arabic countries or the U.S. and different regions of the U.S.

“You’re running into an issue of trying to find a neutral type of Mandarin or a neutral type of Cantonese with all the flavors of those various Asian languages to make it work for everybody,” he said. “It’s not just that someone may speak Korean or they speak Mandarin. There’s actually a lot more issues than that.”

Otoupal said a baseline requirement that clients will use is looking at the main languages of the regions where the Chinese flights are coming from. They also need to look at the airlines and the actual traffic they bring in.

“You are likely to cover the bulk of who is coming through your airport in this type of model,” he said.

Putting in proper voice announcements has shown to improve overall customer satisfaction and make the boarding process smoother, Otoupal said.

“I don’t know if you’ve ever traveled to mainland China, but it’s very hard to figure out what is happening,” he said. “If you think in your shoes when they’re traveling through your country, it’s very complicated to figure out where to go, when to board, if you’ve already started boarding, what is happening, so providing all these things in all the languages thought the displays, through the voice announcements, through the all the channels, enhances the passenger experience and makes it actually much less stressful for everybody.”

Medium and small hub airports could also see an influx of Chinese travelers, who are connect through larger airports. Otoupal said a technological solution may be the best option for these airports because it can be difficult to find Mandarin speakers in their communities. Building a suite of languages for boarding announcements could be a cost effective solution to bridging the language barrier at these airports.
Otoupal same there are concerns from airports about too many announcements and each language drowning the others out, so you have to limit the languages for each situation and staff needs to be trained on how to use it properly.

“When you look at it from a practical perspective, say you’re looking for a lost passenger and you’re looking for him in the language that we speak, you’re more likely to use more messages to get him than if you do one message a language he speaks,” he said. “Therefore, you’re creating less noise, you’ll make less calls and it makes for better customer service and an overall better experience for the passenger.”
Before LAS even secured service to mainland China, Jones said leaders knew they needed to address wayfinding issues. Leaders built a three-faceted program to address those needs.

Jones said LAS developed a welcoming ambassador program where the airport contracted with a company to provide Mandarin speaking ambassadors with specially designed uniforms that are deployed when passengers from the Beijing flights arrive in the terminal.

They assist in helping the passengers to the customs port, guiding them to ground transportation to find their hotel or to a security checkpoint.

“As part of that, we had outreach to our concessionaires so they knew this was coming,” Jones said. “Our duty-free store has started to stock up on items that they know are popular with Chinese travelers from their experiences in other markets that have Chinese service.”

Jones said the airport’s master concessionaire even had restaurants design menus printed in Chinese so the customers could read them and added items with traditional Chinese foods to make the travelers feel welcome.

The second piece of the planning was elementary wayfinding. Jones said staff walked the floor for an international flight coming in and thought out what the travelers will see when they get to each point and what they will need to know next.

The third element of LAS’s plan was engaging Chinese travelers using the social media program WeChat.

“We wanted to have a presence on that website so that at the point where somebody is saying, ‘you know what, I’m going to have some time off two months from now, I’m thinking of going to the United States, where do I want to go,’ I want them to find our page on their WeChat site when they’re in China and look at that and see that we’ve produced messaging in their language,” he said. “Signage, directions, details on what kinds of stores or what kinds of shops restaurants, etc. and they can look at that and they can become comfortable and familiar with the airport even before they’ve made the decision to fly here.”

Jones said QR code readers are actually very popular in China, so some of the signage at LAS features the code so it will take the travelers to the airport’s WeChat page, so they can find even more information about the airport.

“Between the online presence, the live presence and the actual directional sigange and then with what we’ve done with our retailers and our concessionaires, all of those things we feel are really above and beyond what other airports are doing in the United States and we really want to set that bar really, really high,” Jones said.

One month into the Hainan service and Jones said there hasn’t been any feedback, which is a good sign.

“It’s telling us it’s working because if we hadn’t done these things we would’ve been inundated with emails and phone calls and staff knocking on the door saying ‘hey you got to do something because these people just don’t know where to go,’” Jones said.

About the Author

Joe Petrie | Editor & Chief

Joe Petrie is the Editorial Director for the Endeavor Aviation Group.

Joe has spent the past 15 years writing about the most cutting-edge topics related to transportation and policy in a variety of sectors with an emphasis on transportation issues for the past 10 years.

Contact: Joe Petrie

Editor & Chief | Airport Business

[email protected]


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