Zhao Dong, Chairman of XiamenAir, explains how the carrier will improve yields and efficiency while minimizing costs and risk. Interview by Graham Newton
Airspace restrictions, high-speed rail, and a shortage of airline captains threaten to dampen Chinese air traffic growth. But XiamenAir will use the platform of the Chinese Government’s Belt and Road Initiative to support international expansion. Profitable for 32 consecutive years and counting, the country’s first private airline has its sights set on answering increasing demand while improving its environmental mitigation.
How is the airline performing in 2019 and what are your targets for the next six months?
In the first five months of 2019, XiamenAir has carried more than 14 million passengers and achieved an operating revenue of RMB13 billion.
The big project for the remainder of the year is the opening of Beijing Daxing International Airport. On 13 May, XiamenAir participated in test flights for the airport together with Air China, China Southern, and China Eastern. Our subsidiary, Hebei Airlines will be one of the first airlines to start operating at Daxing in September. And XiamenAir will transfer all its operations to Daxing in March 2020. At that point, the XiamenAir Group will have more than 100 daily flights from Daxing.
Also in 2019, we will work to reach our annual targets of 40 million passengers and RMB36 billion operating revenue, which will help to make us profitable for the 33rd consecutive year.
What is the strategy for the airline over the next few years to ensure it continues its run of profitability?
XiamenAir will make every effort to maintain its competitiveness and promote brand awareness in the global aviation industry.
We will work hard on domestic operations, but we will also seize the opportunities arising from the Chinese Government’s Belt and Road Initiative – its global development strategy – in the international market. This will enhance our hub network from Xiamen, improve the seamless transfer experience for passengers, and so attract more transfer passengers. As the third biggest airline at the new Daxing Airport, we will fully leverage our advantages to better optimize the network and develop Beijing as a new driver.
China has long been known for its etiquette. Giving the best to our guests is always the way to show our hospitality
Alongside this, the plan is to utilize state-of-the-art technology and integrate hotels and tourism resources to provide passengers with one-stop traveling solutions.
In essence, through a variety of initiatives, we’d like to achieve high yields and high efficiency but low costs and low risk.
How are you positioning the brand for the overseas market, particularly as you expand your network?
China has long been known for its etiquette. Giving the best to our guests is always the way to show our hospitality.
Ever since it was established, XiamenAir has had a “sincerity-oriented and customer first” service ethos. The airline has also formed its unique service brand of “Fine Management, Respectful Attitude, Elaborate Process, and Inner Beauty.” According to China’s Civil Aviation Passenger Service Evaluation (CAPSE), XiamenAir has been voted by passengers as the best airline for service for 27 quarters.
While expanding abroad, we keep strengthening the idea of “Chinese Tradition, Global Vision.” We have combined, for example, Chinese tea, opera, and flower culture with on-board products, and there are certified sommeliers and baristas to better meet the demands of foreign passengers.
We use cutlery designed by an award winner from Greece and hand-made white porcelain from an artist in Fujian province to present the beauty of western and eastern culture.
In the first five months of 2019, XiamenAir has carried more than 14 million passengers
Is SkyTeam important to your strategy and is the alliance still relevant given the different forms of cooperation in the market today?
Since joining SkyTeam in 2012, XiamenAir has experienced great development. Together with partner airlines, we can connect our customers with 240 destinations in more than 40 countries.
Recently, SkyTeam proposed a new strategy to create a more seamless travel experience through the implementation of technology. This strategy ties in with the vision of XiamenAir to focus more on customer service. According to the latest Customer Experience Questionnaires Report, the net promoter score of XiamenAir is 74%, which is 19% higher than the average level of SkyTeam and is the top position for the fifth consecutive time.
Of course, joint ventures and equity cooperation has become important in the aviation industry but these are a supplement to alliances not a replacement. XiamenAir has a joint venture with KLM on our Amsterdam route that has achieved great success.
But, constrained by different countries’ regulations, JVs and equity cooperation cannot be implemented in every market. In this regard, alliances still serve as a platform for a wider scope of partnerships and enables airlines to work together for the good of the customer in multiple fields including operations, network connectivity, frequent flyer programs, lounges, and so forth.
What challenges do you see to the growth of Chinese air travel?
The biggest challenge is the constraint of airspace. In the past 10 years, Chinese air traffic has maintained double-digit growth year on year, yet the annual growth rate of total stage length in our airspace is only 3.6%.
Market demand has clearly outstripped the airspace available to be used, and this has affected overall on-time performance. Further reform in China’s airspace management will provide better support for the rapid development of civil aviation.
The second challenge is the shortage of aircraft captains due to the booming civil aviation business. It takes about 5–7 years to get a captain through training. The huge demand for captains has driven Chinese carriers to introduce more foreign pilots. At present, XiamenAir employs about 100 captains from various countries. But they complement our team and enhance our international operational ability.
Another challenge that must be mentioned is the development of China’s high-speed railway (HSR). By 2018, China’s HSR track totaled 29,000 kilometers, accounting for more than two-thirds of the world’s total HSR track. HSR has a punctuality and price advantage that will definitely attract what were previously airline passengers.
However, I also see this as an opportunity. Civil aviation has an irreplaceable advantage in speed and reach. “Long haul by air, short haul by rail” will be the trend. A HSR station embedded in the airport will extend the catchment area. Intermodal connectivity will not only bring greater convenience to passengers but also be a new driver of growth.
Finally, there is China-US trade tension. This may have a serious impact on the global economy and increasing tariffs between the two countries does no good to the development of the global aviation industry. We need to keep an eye on the situation.
In the past five years, China has built 33 new airports, and another 50 airports will be completed within the next five years. RMB 100 billion has been invested in Beijing Daxing International Airport. The pace of construction and level of investment is stunning
Is there anything more to be done to improve infrastructure in China?
The Chinese government attaches great importance to the development of civil aviation. By the end of 2020, the total number of airports for scheduled, commercial air traffic in China will reach around 260. In the past five years, China has built 33 new airports, and another 50 airports will be completed within the next five years. RMB 100 billion has been invested in Beijing Daxing International Airport. The pace of construction and level of investment is stunning.
What’s more, aviation infrastructure development in China will be accelerated in the future. New airports under construction include Chengdu, Xiamen, and Qingdao. Heavily congested airports like Hangzhou and Shenzhen have plans to be expanded and the Civil Aviation Administration of China (CAAC) has clearly stated that it will focus on improving the competitiveness of the international hubs in Beijing, Shanghai, and Guangzhou.
Moreover, world-class airport clusters will be essential to address the development in major Chinese economic zones, namely Beijing-Tianjin-Hebei, the Yangtze River Delta, the Pearl River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area.
Are there any regulatory changes needed to support the industry’s growth?
Firstly, safety is the foundation for the sustainable development of the aviation industry. I think governments and civil aviation authorities still have room to enhance the airworthiness certification procedure of new aircraft.
Secondly, IATA predicts that global air transport demand will double by 2037. China, India, and Indonesia will be the important driving forces of the growth. The growth of these markets requires governments to look at the development of the aviation industry with a more open mind. For the good of economic growth, employment, and trade development, enhanced liberalization initiatives, such as visa policies, are essential.
Governments also need to review rising taxation on the aviation industry. The global economy is under pressure. As a high-risk, low-profit industry, the regulators need to consider easing the tax burden of the aviation industry. That will help airlines to deliver economic benefits worldwide. And that, ultimately, will benefit governments a lot more.
Regionally, is there enough cooperation between countries to support the increased demand for air travel?
Globalization has united aviation into one market, leading to the need of cooperation and collaboration. The Belt and Road Initiative proposed by China aim at linking regional markets and bringing great opportunities to the industry. CAAC has signed bilateral aviation service agreements with 62 countries as part of the Belt and Road Initiative, driving an annual growth increase of more than 20% from 2013 to 2018.
Fujian province is the core region of the Belt and Road Initiative. XiamenAir, headquartered in this province, has launched 30 related routes to eight countries, with overall capacity increasing by 416% compared with 2013. We believe that the Belt and Road Initiative will be a strong driver in collaboration and the growth of the global aviation industry.
Including 2018, our fuel consumption has declined for five consecutive years, an accumulative reduction of 14.8%
Is the environment an issue for Chinese airlines or do you see this as mostly a European and US issue?
The environment is an issue for the future of all humanity. The Chinese Government made a commitment at the  Climate Conference in Paris and further announced a three-year plan in 2018.
As we move toward a more open world, XiamenAir embraces its environmental responsibilities. In February 2017, we signed an agreement with the United Nations in New York and became the first airline in the world to cooperate with the UN on the Sustainable Development Goals. Including 2018, our fuel consumption has declined for five consecutive years, an accumulative reduction of 14.8%. We have lived up to our promise of [dealing with] emissions every year.
If you could change one thing about aviation in general, what would it be and why?
I will continue with the environmental theme. All airlines can do more.
As a partner with the UN to implement Sustainable Development Goals (SDG), XiamenAir has adopted a series of initiatives including new technologies, new materials, and new energy sources to promote environmental protection.
We use lighter catering trolleys, for example, and control our airborne water amount. We have also replaced petrol vehicles with electric vehicles, use paper made from bamboo instead of trees, and classify our garbage to improve recycling. We plan to gradually eliminate all plastic items for food and beverages, and provide low-oil, low-salt, and low-sugar choices, highlighting both the environment and the health of passengers.