Published in March 2016 issue
By Ben Wang, Bill Hough and Kendrick Dlima
Relations between China and the United States were not great throughout the mid- 20th century. When mainland China became a Communist state in 1949, after the Chinese Civil War, all diplomatic relations between the US and the newly formed People’s Republic of China (PRC) were essentially severed. The countries were adversaries during both the Korean and Vietnam Wars. However, this all began to change on February 21, 1972, when a US Air Force VC-137C landed at Beijing’s Capital Airport (PEK) carrying President Richard Nixon, who began the process of restoring diplomatic relations with the PRC.
Today, both the US and China have very large and interconnected economies. Currently, the US has about $50 billion invested in the PRC, and conversely, is about $1.3 trillion in debt to China. What’s more, over 3.25 million people of Chinese descent live or work in the United States. Many return to China at least once a year to visit friends and relatives. Last year, both countries began issuing multiple-entry visas lasting up to 10 years to promote business and tourism between the countries. China and the US are two of the largest powers in the world, and adequate means of travel between the two countries are an absolute necessity.
A NEW AIRCRAFT FOR TRANS-PACIFIC MARKETS
As travel between the two countries has increased, aircraft manufacturers have developed new airliners to serve Trans-Pacific routes. Airbus developed its A380 while Boeing, studying new versions of the 747, realized that the configuration and capacity of this aircraft would exceed projected demand and began looking at alternatives. The idea was that smaller aircraft could serve secondary point-to-point routes and enable passengers to bypass congested hubs.
The company proposed a conventionally designed aircraft—the 7E7 Dreamliner—an efficient twin engine that, ultimately, became the 787. Starting with a 50-aircraft order from Japan’s ANA (NH) in 2004, the 787 soon began racking up impressive sale figures.
Currently, two models of the 787 are in active service: the basic 787-8 and the 20ft (6m) longer 787-9. When it will enter service, later this decade, a third model, the 787-10 will carry between 290 and 310 passengers when it enters service later this decade. The 787’s smaller size, compared to those of the A340, A380, 777, and 747, enables airlines to use it for thinner long-haul routes and to experiment with a smaller aircraft before committing to larger ones.
The Dreamliner is now a major factor in international air transport.
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DREAMLINERS FLYING BETWEEN CHINA AND THE UNITED STATES
The 787 has opened up many new routes between the US and China, particularly in secondary markets. Increased business traffic between the two countries has created a tremendous demand for air service, especially from the tech industry.
“With the growth of the technology industry, trade between the US and China, and especially this region [Silicon Valley], has expanded,” said Ji Chun Liu, Director of HU’s International Department.
According to projections made by the International Air Transport Association (IATA), China will account for some 1.19 billion passengers in 2034, 758 million more than in 2014, with an average annual growth rate of 5.2%. The 787 will enable airlines to increase both the number of seats and the frequency of flights between pairs of cities.
In an online interview with Buying Business Travel, Jeff Smisek, former CEO of United Airlines (UA), explained how the 787 can help connect the US and China. “United is the largest US carrier to China by far, with twice the traffic of our competitors,” he said. “We recently started service from San Francisco to Chengdu, a so-called secondary city—secondary cities in China have 8-10 million inhabitants—and we’re able to do this and take the commercial risk because of the efficiency of the 787; nonstop into a city that’s never had service from an US carrier. If it works, it will open up a number of other secondary markets… Aircraft like the 787 enable us to fly to destinations we otherwise couldn’t.”
United also uses its new 787-9s to connect Los Angeles (LAX) and Shanghai (PVG). It plans to introduce seasonal 787 flights connecting San Francisco (SFO) and Xian (XIY) between May and October, subject to government approvals. Meanwhile, last June, American Airlines (AA) introduced the 787-8 on the Chicago-O’Hare (ORD) to PEK route (Airways, September 2015), and, in November, opened LAX-PEK with the Dreamliner as well.
Chinese airlines operating the 787 on Trans-Pacific routes include China Southern (CZ) and Hainan Airlines (HU). The former introduced the 787 on nonstops from SFO to Wuhan (WUH), continuing to Guangzhou (CAN), on December 16, 2014. Last year, it introduced nonstops from SFO to CAN.
HU took delivery of the first of 10 787-8s on July 4, 2013. “The 787 will enable Hainan to open new routes from Beijing to North America and provide our unique ‘Eastern-style’ five-star inflight experience to global passengers,” Mu Weigang, Vice Chairman of Hainan Airlines, said at the time.
The PRC’s fourth largest airline in terms of fleet size, HU recently inaugurated service between San Jose, California (SJC) and PEK; and PVG to both Seattle (SEA) and Boston (BOS). The new routes doubled the airline’s service between China and the US. HU is also using its 787s to increase the frequency of its PEK-SEA, PEK-Toronto (YYZ) and PEK-ORD services.
Hainan also became the first airline in the PRC to achieve a Five- Star Airline rating by SkyTrax, a UK based air transport industry research and advisory company, which it held for five straight years. It is an elite league; in 2015, only six other airlines shared the five-star rating with Hainan: ANA, Asiana (OZ), Cathay Pacific (CX), Garuda Indonesia (GA), Qatar Airways (QR), and Singapore Airlines (SQ).
CHERISHED EXPERIENCE–A CASE STUDY
SJC to PEK is an excellent example of the long and thin route that Boeing had in mind when it designed the 787.
Before this route was introduced in June 2015, SJC travelers heading to China had to either connect in Tokyo or make their way to SFO to catch a nonstop flight. HU couldn’t help but notice that many people in the San Jose area were traveling to China for both business and pleasure. Silicon Valley companies have more than 500 subsidiaries throughout China, and their involvement in Asia—and in China in particular—is growing. Also, more than 220,000 Silicon Valley residents are of Chinese heritage, making China a top destination for people returning to visit relatives and friends, and for tourism. According to both city studies and to the airline, the flights are projected to have an annual economic impact of $105 million on the San Jose region.
Airways flew round-trip in Business Class from SJC to PEK, leaving on the inaugural flight and returning one week later.
For Business Class passengers, pampered service started immediately upon leaving home. HU provides luxury sedan pick-up and drop-off, both on departure and arrival. In Beijing, the service is even better, with a door-to-door escort between the gate and the curb. This personalized service is something other airlines don’t offer their Business Class passengers.
Once on board, the Flight Manager (Purser) introduced herself, and the attentive service began. The food was excellent. The presentation was a choreographed event performed by two Flight Attendants (FA). Hainan’s dinnerware was distinctive, the individual pieces interlocking to form a complete work of art. High-end Chinese delicacies such as steamed dumplings and crab soup rounded off the luxurious experience.
After the meal, turndown service with duvet, extra sleep pillow, and pajamas, along with a Bulgari amenity kit, ensured a restful sleep. Unlike other airlines, HU did not skimp on the quality or presentation on the pre-arrival meal. As one would expect, service on the inaugural flight was impeccable. Unfortunately, on the return, it was not as polished.
Although there was a relatively small number of passengers onboard, the FAs rushed through both meal services. There were two or three attendants serving each passenger, and their workflow was not quite right (perhaps due to their inexperience). This caused various fumbles such as small spills and items dropping from the service cart. The FAs muttered “Sorry” more than once.
In general, there seemed to be a language barrier between the crew and English-only speaking passengers, interactions becoming difficult when communication ventured outside common phrase-book territory.
Overall, however, and on both flights, the Cabin Crew was extremely attentive, genuinely caring, and responsive to everyone’s needs.
A DREAMY FUTURE
Boeing continues to expand its presence in China. In September, Boeing and the Commercial Aircraft Corporation of China, Ltd. (COMAC), announced the upcoming opening of a facility in China for the interiors’ completion, painting, and delivery of Boeing 737 aircraft to Chinese customers. This jointventure facility will significantly expand Boeing’s collaboration with China’s aviation industry while enabling future production at Boeing’s 737 final assembly factory in Renton, Washington, to increase. Boeing also announced Chinese orders and commitments for 300 Boeing narrow- and wide-body aircraft.
The Boeing 787 continues to make inroads in the Chinese market. According to news reports gathered from security filings, HU is ready to place an order, valued at $7.7 billion, for 30 of the larger 787-9s, with deliveries starting in 2021. Because of HU’s hefty expansion this year, the airline had to revert to the A330-200 on its PEK-SEA service, so that the more cost-effective and longer-range 787s could cover flights in newer markets with lower demand.
Another Chinese 787 customer, Xiamen Air (MF), anticipates using the 787 on long-haul routes from Fujian province to Europe, North America, and Australia. Beijing-based Air China (CA) also has 15 Boeing 787-9s on order. It expects them to be delivered starting in 2016 for use on North American routes. CA will be an airline to watch because it also has 10 Airbus A350-900s on order. This will enable a direct comparison of the performance of the competing Boeing and Airbus product lines.
In the US, AA is currently receiving 14 787-8s. Then, it will take delivery of 22 787-9s. UA will receive 15 additional -9s and 25 of the larger -10 variant aicraft.
For US and Chinese airlines alike, the Dreamliners can’t come soon enough to satisfy the demand for expansion into this exciting market.