Tan Wangeng, President & CEO, China Southern Airlines, says it is time for China’s voice to be heard on the world stage.
Were you happy with the airline’s performance in 2015, and what are your targets for 2016?
Last year was definitely a good one for China Southern, and the senior management was very satisfied with the result. We made a profit of RMB6.1 billion.
There have also been some significant changes in the airline. In 2009, international operations accounted for 18% of our available capacity. Now it is 30%. And in just 18 months, direct sales improved from 18% to more than 42% of tickets sold.
The strong growth that we saw at the start of the year leveled off starting in April.
But with strong forward bookings, we remain optimistic for the rest of 2016.
Why are you looking to build up the Canton Route? (Europe to Australia via Guangzhou)
The Canton Route has great significance for China Southern. Many years ago, the airline was always in the top five for passenger traffic, according to IATA statistics. But historically more than 80% of our traffic was domestic. Few people from outside of China had traveled with our airline. The Canton Route is playing a major role in changing that.
Guangzhou—also known as Canton—is our headquarters and located in southern China, so is ideally located for serving Southeast Asia and Australasia. The Canton Route is about giving passengers from Europe access to that region via Guangzhou. The kangaroo route has performed very well for several airlines, and we think we can compete via our hub in Guangzhou.
We have seen some very positive results over the past five years. On an average flight from London, Paris or Amsterdam to Guangzhou, it is not unusual to see half the passengers—and sometimes as much as 70% — transfer onto flights to Sydney, Melbourne, and other cities in Australasia. The Canton Route is a key tool in promoting both our international operations and our hub operations in Guangzhou.
How will you promote your brand on a global scale?
Actually, we are promoting ourselves simply by being in the market. We have launched many international routes in recent years. We needed to have passengers fly with us and experience what we can offer. As mentioned, our international capacity is growing, and that means our international brand is growing, too.
We used to have only two destinations in Europe: Paris and Amsterdam. Now we also offer London, Frankfurt, Moscow and Tbilisi. And the focus is not just on the Chinese communities in these cities, but on the general market. In fact, we use Twitter and Facebook and other social media to promote our offers.
But we are active top to bottom. So we also take part in international events and conferences, we help the foreign embassies and consulate generals in China with promotional events, and we sponsor international sporting and cultural events.
This is important not just for China Southern but for Chinese aviation generally. It is time for the voice of Chinese airlines to be heard on the world stage.
What about the US market and US-China talks on air services?
There are very good prospects for air travel between these two countries, and airlines want to increase routes and frequencies. The fact is that the existing traffic rights are used up. It will be important for the two governments to negotiate further traffic rights as soon as possible.
Before that can happen, though, the Civil Aviation Administration of China (CAAC) is reviewing how the current traffic rights are being used and if they can be used more effectively.
How important is cargo to your business, and what are the challenges in the cargo sector?
China Southern has 14 freighters: two Boeing 747s and 12 Boeing 777s. We also have an enormous amount of space in the belly of our 650-plus passenger aircraft. Overall, though, cargo is just 7% of our total revenue. That is not as much as some might expect, but it is still important. Of course, cargo has not been performing well in recent years and we have yet to see a recovery. But we are seeing a surge in cross-border e-commerce, and that makes me optimistic about the future.
At the moment, the likes of Alibaba and SF Express are not having a direct impact on our cargo operations. They are not involved in international long-haul cargo operations, and our widebody long-haul fleet still differentiates us in the market.
What are the benefits of your SkyTeam membership?
We have benefited a great deal since we joined in 2007. The obvious advantage is the extension of our network; it doubles the capacity that we can offer to our customers.
But more than that, membership of SkyTeam has had an important role in integrating China Southern into the international market. Regular meetings have enhanced the international perspective of our senior management, for example, and have also increased their expertise. And we have sent teams from various areas of operations, including maintenance, to learn from SkyTeam members.
SkyTeam has been crucial to the transition of China Southern from domestic carrier to international carrier. That means it has also been crucial to improving the passenger experience, and especially the experience of our high-yield passengers.
But is it the case that airlines are finding more value in other types of business relationships, such as joint ventures and equity investment?
It’s true that JVs and equity investment represent a further level of cooperation. China Southern has a very productive JV with Air France-KLM. It is a deep and long-term relationship that is of great benefit to both sides. That makes me think that JVs and equity investment will be a growing trend in the industry.
But SkyTeam membership also remains extremely important to China Southern.
What developments would you like to see in Chinese airport infrastructure and airspace?
Governments at the state and local levels have attached great importance to airports and air traffic control. We have many new airports in China that can handle up to 10 million passengers per annum. And many of these integrate the various modes of transport, so they have highways, high-speed rail connections and, where appropriate, they also connect to the local port.
So it is not just having a new airport that represents the difference from the past, but the way they are designed. And as far as I know, all airports are trying to expand. So airport infrastructure doesn’t worry me.
More of a concern is the soft side. This is true for all emerging markets. We need to improve the training of our staff and the service they offer.
Take ground staff — especially those who are responsible for helping transfer passengers through our airports. That is a really important job, but it takes time to get the training and the service right, and perhaps it takes longer than it does to build a new airport.
Airspace is a more difficult challenge. There is congestion, especially around the major hubs, such as Beijing, Shanghai and Guangzhou. However, top officials from the government on both the civil and military sides have set up a team to tackle the problem, and there has been some positive progress. I think we will begin to see far more airspace for civil use, especially around the major hubs.
Does the government understand the value of aviation, and are there any regulations you think should be changed?
The government at all levels is really enthusiastic about aviation and, in fact, it has really high expectations. That is putting pressure on Chinese carriers to open more routes.
Provincial governments, such as Guangdong, are doing their best to assist airlines and attract passengers. So, without doubt, there is great government support.
But that doesn’t mean there is no room for improvement. Visa policy is an obvious example. A 72-hour visa-free transit policy should be made more widely available. Other governments have their part to play in this as well, because it is often inconvenient for Chinese outbound passengers to get visas, too.
We also need to revise customs clearance so travelers arriving at Point A in China and going on to Point B shouldn’t have to pick up their luggage in Point A.
And China Southern has also made a complaint about the slot auction process being trialed at Shanghai Pudong and Guangzhou. It just increases airlines’ costs. I hope CAAC will be more cautious in the future.
January 2013 Appointed Vice Chairman of the Board at China Southern Air Holding Company (CSAHC).
2011 Appointed Party Secretary and President of of CSAHC.
2006 Appointed a Director at CSAHC.
1990 Appointed Head of the Infrastructure Department and Director of Human Resources and Administration Department at the Beijing Aircraft Maintenance and Engineering Corporation.
Degree from Zhongshan University, majoring in economic geography.
Deputy Director General of Human Resources Division (Personnel and Education Division) of the Civil Aviation Administration of China (CAAC).
Director General and Party Secretary of the Northeastern Region of CAAC.