Budget Carriers Set to Take Off in China

HONG KONG—China on Friday unveiled long-awaited guidelines to jump-start the nation's fledgling budget airline market, including pledges of financial support, putting pressure on large state carriers amid increasing competitive threats.

China's aviation regulator said the guidelines, which include simplifying approvals for new low cost airlines, as well as measures to help existing budget carriers expand more quickly, are aimed at further liberalizing one of the country's most tightly regulated sectors.

The regulator said it would consider providing funding to startup budget carriers to help build up their fleets.

The measures follow a shift in the government's commercial aviation policies, which had earlier favored China's three state airlines. In May, Beijing lifted a six-year ban on setting up new independent airlines.

The nation's Big Three airlines— Air China Ltd., China Southern Airlines Co., and China Eastern Airlines Corp.—have already faced intensifying domestic competition amid slower economic growth and the rapid development of high-speed rail.

Low-cost carriers currently account for under 5% of China's aviation market by passenger capacity, far lower than the 50% market share budget carriers enjoy in Southeast Asia.

Among existing airlines that will benefit from the new measures include budget carrier Spring Airlines Co, which sells a large proportion of its tickets via the Internet, bypassing third-party reservations agents widely used by the established state carriers.

For years, the aviation regulator's priority was boosting state-owned airlines, which have been criticized for their inefficiency and poor service. To protect them, the government in 2007 stopped accepting applications for new airlines after briefly experimenting with liberalization in the middle of the last decade.

Other measures to help budget airlines include setting up standards for redeveloping existing airport terminals into low-cost terminals as well as building new ones, said the Civil Aviation Administration of China. In addition, it will encourage airports to reduce landing and takeoff fees, as well as to provide tax incentives for budget airlines.

Source: Wall Street Journal by Joanne Chiu

Mantra Targets $448 Million IPO

SYDNEY--Mantra Group, an Australian hotel operator backed by Hong Kong-based CVC Asia Pacific Ltd. and UBS AG, plans to raise 500 million Australian dollars (US$448 million) in a public listing before Easter, two people familiar with the deal said.

The company had a strong response from Asian investors at an introductory roadshow in January, and it plans to make a final push to raise interest with another in the second week of March, the people said.

The push to list Mantra comes as dozens of Australian companies try to lure investors into initial public offerings as confidence returns to market, but where a number of introductory roadshows have failed to gain traction.

Mantra's goal is to create a listed rival to competitors like France's Accor SA and Oaks Group, a subsidiary of Thailand-based Minor International PCL, according to the people.

The Australian company manages and leases tourist properties and markets them under three main categories—the budget BreakFree label, a midmarket range dubbed Mantra, and the Peppers luxury-resorts brand. It manages 116 properties in Australia, New Zealand and Indonesia.

Mantra's advisers UBS and Macquarie Group Ltd. have been stressing to investors the earnings potential from rising Chinese tourism to Australia, a third person familiar with the deal said. They have also highlighted Mantra's plans to expand into Thailand and boost its presence in Indonesia.

The number of visitors from China rose almost 20% in the year through September, according to Tourism Australia, which hopes Chinese tourism will generate A$9 billion for Australia in 2020, compared with around A$4.2 billion in 2012.

A Deloitte Access Economics paper this month separately predicted national hotel occupancy rates over the next three years would climb to almost 70% from around 67% currently.

Meanwhile, a UBS report this month showed short-stay tourist arrivals from all over the world rose by 9% last year, rebounding from a slump between 2005 and 2011 as a near-record-high Australian dollar kept visitors away. The Aussie weakened by about 15% last year.

"With the Australian dollar peaking in 2011, there appears to be a renaissance in short-term arrivals," the UBS report said.

The sharp rise in tourism from China and elsewhere in Asia has also been supported by a pickup in the number of airlines targeting Australia with low fares, including Malaysia'sAirAsia X Bhd., Singapore's Scoot and China Southern Airlines Co.

Mantra's chief executive, Bob East, said earlier this year that Mantra was tracking 10% above expected earnings before interest, taxes and amortization for the 2014 financial year ending June, which look set to eclipse the previous year's Ebitda of A$63 million. Still, to maintain growth, the company will need to continue winning management rights over new properties.

Some Australian holiday resorts have struggled as the Australian dollar peaked, and remain in a state of disrepair. The price of holiday investment properties in Queensland state's Gold Coast have crashed by as much as 50% in recent years, damping interest in new developments.

To compensate, Mantra has been looking to Southeast Asia. It recently opened its first Asian resort, in Bali, and plans to open another one nearby next month. Mantra's Mr. East said last year that the company wanted to open 20 more hotels in Indonesia over the next three years, and a similar number in Thailand over six years.

An IPO would be a welcome opportunity for majority owner CVC to exit what has been a troubled investment. Mantra Group was originally one half of CVC's leveraged buyout of Global Voyager Holdings Ltd., which also included the travel agency Stella Travel Services Ltd.

Mantra and Stella were demerged in 2009 in a deal between private-equity owner CVC and lender UBS. The agreement saw CVC and UBS convert almost A$1 billion Global Voyager debt to equity, barely a year after CVC bought the business following massive write-downs in the Stella businesses.

CVC and UBS now control 60% and 40% of the restructured companies, respectively. CVC and UBS tried to sell Mantra Group in 2012, but struggled to find the right buyer.

Source: Wall Street Journal by Daniel Stacey

The Bell Tower and Drum Tower in Beijing

Located close to each other, Zhonglou, or the Bell Tower, and Gulou, or the Drum Tower, are collectively known as Zhonggulou in Beijing. Originally designed as official timekeepers in the Yuan Dynasty, they are now two signature buildings where much of the Old-Beijing style is preserved in the modern time. Together with nearby hutong alleys, houses, and residents, they help define a neighborhood where time seems to travel slower


Source: xinhua

Kanbula National Forest Park in Tibet

Located in Huangnan Tibetan Autonomous Prefecture, 131 kilometers (81.4 miles) from Qinghai’s capital city Xining, the Kanbula National Forest Park is an ideal place for traveling, sightseeing, vacation, camping and scientific expeditions. Covering an area of 152 square kilometers (15,200 hectares), the park is famous for its unique landform of red gravel rocks, and features forest vegetation, lofty mountains, soaring peaks crystal water and Tibetan culture


Source: china.org.cn

Mercedes-Benz engineers entry into luxury tourism

Mercedes-Benz and HHtravel, a subsidiary of online travel operator Ctrip.com International, launched the first undertaking in their joint program, Mercedes-Benz Travel, on Tuesday, which aims to tap into the high-end tourism market.

The outbound tours are priced between 130,000 and 290,000 yuan ($47,357), with a maximum of six people on each tour group.

All the products are designed by Mercedes-Benz, which has long experience in servicing elite travelers, said Jack You, CEO of HHtravel.

The German automaker also will provide its local expertise at the destinations, while HHtravel has taken on the responsibility for marketing, he added.

"We look forward to the reaction of the public, as it is the first time Mercedes-Benz Travel has entered this market," said Thomas Eisenbarth, head of Mercedes-Benz Travel.

Some facilities and auto museums belonging to Mercedes-Benz are included in some of the tours.

It makes sense that the luxury car manufacturer is eyeing Chinese outbound tourism, some experts said, especially high-end tourism which has a high margin.

"The joint program should get a win-win result, as the service experience of Mercedes-Benz can make up for the Chinese agency's disadvantages in tour design," said Jiang Yiyi, director of the China Tourism
Academy's International Tourism Development Institute.The huge Chinese market is a lure for the German company, Jiang said.

HHtravel, known for its around-the-world trips, has seen its business double and redouble in the past two years, You said.

The strategy of the high-end agency's parent company to develop segmental markets and provide a range of services also helped Ctrip.com do well over the past year.

Ctrip.com had net revenue of 5.4 billion yuan in 2013, with a 30 percent year-on-year rise, and saw its net profit increase by 40 percent to 998 million yuan in 2013, according to the company's annual report.

Besides the high-end tourism, Ctrip.com is also exploring some new businesses including car rental and tickets of some spots.

"Ctrip.com is poised to occupy the position of the largest online travel agency in China," said Wang Tingting, analyst from iResearch Consulting Group.

During the same period, eLong Inc, Ctrip.com's main rival, recorded its first loss in 2013 after having enjoyed five years of profits.

The online travel agency, which focuses on the hotel booking business, suffered a net loss of 167.7 million yuan, while its net income was 500,000 yuan in 2012, its financial report said.

In order to compete with Ctrip.com and get more market share, eLong offered many promotions, such as coupons and group purchases.

Although its hotel commission revenue increased 41 percent in 2013 from the year before, its commission per room night in 2013 fell by 12 percent, due to higher promotions and lower daily rates, according to eLong's annual report.

Source: By Wang Wen (China Daily)

China sees 3.26 billion inbound tourist travels in 2013

Tourists gather to watch the Tianchi Lake on the top of the Changbaishan Mountain in northeast China's Jilin Province, Sept. 30, 2013. China saw 3.26 billion inbound tourist travels in 2013, an increase of 10.3 percent year on year. In 2013, revenues from inbound tourism stood at 2.6276 trillion yuan (about 430 billion US dollars), up 15.7 percent from the previous year


Source: Xinhua

Monopoly in China's civil aviation still strong despite reforms

After more than three decades of economic reforms, the civil aviation sector in China is still monopolized by the nation's six leading civil aviation groups in many areas, including air routes, booking systems, ground services, aviation fuel and aviation supplies.

However, reform in the opening of lower airspace has accelerated after the third plenary session of the 18th Communist Party of China as the Civil Aviation Administration of China plans to set up a team to lead the reform.

China's aviation industry was reformed in 2002, when three air transport firms civil aviation groups — China National Aviation Holding Company (Air China), China Eastern Airlines Corporation Limited and China Southern Air Holding Company (CSAH) — as well as three aviation services groups — China TravelSky Holding Company, China Aviation Oil Holding Company and China Aviation Supplies Group Corporation — were established.

Reforming the civil aviation sector has been a slow process, with some saying that certain market concentration had helped maintain ideal aviation safety standards for many years.

Tian Baohua, a member of the policy consulting team of the Ministry of Transport, however, stated that safety was not an excuse for slow reform in the civil aviation industry.

Tian, who is experienced in drafting reforms for the industry, said the sector had tried to reform a couple of times, but the reforms were abandoned or suspended due to external factors.
China Aviation Supplies has monopolized the procurement of air-related materials.

In other countries, airline companies have the power to decide the timing and volume of their procurement while purchasing aircrafts. Both state-owned and private airlines in China, however, have to make such purchases through China Aviation Supplies as the government is of the view that centralized procurement can reduce prices.

An executive at a state-owned airline said that centralized procurement was sometimes more expensive, however. China's airline companies use the "world's most expensive fuel" as the aviation fuel supplies, pipelines and refuel channels are controlled by China Aviation Oil.

As for IT solutions for the travel industry, TravelSky is the dominant provider in China. A report in 2000 showed that TravelSky charged 5.50 yuan (US$0.90) per ticket sold by domestic airline firms, which earned the company 330 million yuan (US$54.1 million) in 1999, based on a total capacity of 60 million (US$9.8 million) that year.

In contrast, airlines in other countries can choose freely which IT solution provider they want to work with.

Source: Want China Times

The Potala Palace in Tibet

The Potala Palace is considered to be a model of Tibetan architecture. Located on the Red Hill in Lhasa, it covers more than 360,000 square meters and has 13 storeys


Source: china.org.cn

'A Forest of Ten Thousand Peaks'

Photos taken February 21, 2014- Bird's-eye view of Wanfenglin in Xingyi, Guizhou, China. Wanfenglin, meaning a forest of ten thousand peaks, is a national geological park


Source: Xinhua

Chinese airlines warn of third-party check-in app risks

Chinese developers of third-party smartphone apps that allow users to book and manage their flights recently encountered a setback as two leading airline companies issued warnings about the risks of using the apps to check in online, the China Business Journal reports.

"Third-party apps offering mobile phone check-in infringe the business interests of Air China as they use Air China's name, trademark and corporate identity without seeking the company's approval," the flag carrier said in a recent statement.

Air China also said users' check-in made with these apps might not be valid, and that the carrier would not be held liable if the private information of app users is leaked.

China Eastern Airlines published a similar statement on its website on Jan. 21, calling for these apps to stop offering the online check-in service.

The online check-in service is seen as a feature that helps airline companies differentiate themselves from online travel sites since it is exclusively available through the carriers' websites.

However, this changed when Beijing Aotian Huijin Science and Technology's Hang Ban Guan Jia app began offering online check-ins in September last year, which was followed by similar apps being provided by travel sites CTrip and Qunar.

"All carriers have their own official app and have continued to improve the platform. Carriers prefer passengers using the official app to book and check in flights but cannot match third-party apps in terms of user numbers," an aviation industry insider told the paper.

CTrip's app was downloaded 101.7 million times through the 360 app marketplace and was the most popular one, the paper said, followed by Hang Ban Guan Jia's 7.16 million. In comparison, the number of downloads of Air China's app was 180,000 times and China Eastern Airlines' was 60,000 times.

Aotian Huijin's marketing head Zhang Hongji said that the company is working closely with Air China and Shenzhen Airlines and is in talks with other carriers, including China Eastern, China Southern and Hainan Airlines on prospective collaboration.

The company added that a check-in through its app is made with the carriers' official websites and should be valid, while Qunar also promised the same.

Another industry insider said that carriers were hoping that the rise in mobile phone usage would help them reduce the dominance of third-party services, including travel websites, established on the PC end. But third-party apps pose a threat to carriers as they are also aspiring to become providers of travel services beyond flights.

Source: Want China Times 

253 mln holiday trips on China's trains

BEIJING, Feb. 23 (Xinhua) -- China's railways have sped passengers to their destinations 253 million times since this year's "chunyun" began 38 days ago, China Railway Corporation (CRC) said Sunday.

On Saturday, 7.73 million journeys were made on Chinese railways, and 7.5 million are expected for Sunday. The corporation said it would run 487 extra trains on Sunday to cope.

China's transport system is put to the test during chunyun, the 40-day travel period around the Spring Festival which started on Jan. 16 this year.

Although chunyun is nearing its end, the number of daily trips will remain high until Feb. 24 as students and workers get back to their daily toil. Migrant workers usually go to their hometowns for family reunions at New Year and return to the cities following the festivities.

Ticket shortages are expected only on a couple of crowded lines, according to the CRC.
About 3.62 billion trips are expected to be made on all modes of transportation during the 40-day period, according to official data.

Source: Xinhua

Outbound Chinese tourists to drive global luxury products market

Buying luxury products is one of the major reasons that Chinese nationals travel abroad, a sign that the country's increasingly rich population will boost worldwide luxury sales, according to a Friday report in the China Youth Daily, the official newspaper of Communist Youth League of China.

Some 64.6% of Chinese tourists bought luxury products on trips to Hong Kong in 2013, 46% while in Europe and 33.4% while in the United States, the report said, citing data from global online travel service Travelzoo.

In comparison, only 12% of China's inbound tourists bought luxury goods in 2013.

The report said a high disparity in price tags between the Chinese and overseas markets is the major reason for this. China charges 30%-40% in tariffs for imported luxury products, raising the price in China.

Tax rebate policies also help drive Chinese tourists' purchases abroad, said the report. It estimated that overall tax rebates from European countries to Chinese tourists can add up to €3 billion (US$4.1 billion) annually.

Binge shopping is often associated with increases in Chinese outbound travel as many Chinese choose to go abroad during the National Day and Spring Festival holidays, each lasting up to seven days.

A previous report issued by US-based financial services firm Bain Capital drew an identical conclusion. Of the money Chinese spent on luxury products in 2013, two-thirds of it was spent abroad, the company said.

New York multinational financial services provider Morgan Stanley predict that Chinese outbound tourists will spend an annual sum of US$194 billion overseas by 2015, nearly double the current level.

Source: xinhua via want china times 

West Lake in Dali, Yunnan

 Photos taken February 19, 2014- West Lake, Dali,Yunnan China


Source: xinhua

The Bashang Grasslands in Inner Mongolia

The Bashang Grasslands, the nearest prairie destination from Beijing, is regarded as the most beautiful highland landscape in the China. The special climate and geographical position at the junction of the North China Plain and the Inner Mongolia Grasslands give Bashang its unique natural landscapes and make it a popular destination for tourists and photographers


Source: china.org.cn

China Southern to Join New York Skies

HONG KONG—China's biggest airline will launch direct flights from its Guangzhou base to New York this summer, forming a cornerstone service to its fledgling southern China hub as it targets growing international transit traffic.

China Southern Airlines Co.'s decision to add the high-profile route reflects rising domestic competition, but the plan pits the company against some of Asia's biggest airlines also serving the Greater New York area.

Chinese carriers are racing to boost their international reach as an increasingly congested home market puts intense pressure on ticket prices and weighs on earnings. With demand for outbound travel growing, China's three state-owned airlines, which together account for nearly 80% of China's commercial airline traffic, have been adding international flights over the last two years, with a focus on long-haul services.

The state carriers are facing a tougher new reality as the Chinese government moves to liberalize the domestic airline market and promote the development of low-cost carriers. Beijing last May lifted a six-year ban on setting up new independent airlines, signaling a looser grip on the industry.

China Southern said it plans to operate four weekly flights into New York's John F. Kennedy International Airport from Guangzhou starting in August, extending its North American reach to the East Coast beyond existing gateways of Los Angeles and Vancouver. The plan is to attract travelers not just from China, but from other countries, who would fly to Guangzhou to catch China Southern's service—so-called transit customers.

"We are taking advantage of an expanding Guangzhou airport to build…an integrated international hub for the Asia-Pacific," said Tan Wangeng, China Southern president.

The airline will deploy its Boeing 777-300 extended-range aircraft for the 15-hour flight, said Mr. Tan, with the first of 10 such jets it has on order entering the fleet next week.

China Southern is the world's fifth biggest by passenger numbers, having carried 91.8 million people in 2013, but its international profile is lower and its global footprint smaller than flag carrier Air China Ltd., which operates out of Beijing.

China Southern is building its international hub in the southern city of Guangzhou, and last year launched direct flights to Moscow, while increasing frequencies to cities in Australia, New Zealand, the U.K. and Canada.

New, more-efficient long-range jets are helping make a larger number of routes commercially viable for the airline, which was the launch customer in China for the Boeing787 Dreamliner and the Airbus A380 superjumbo.

Yet like its state-owned rivals, China Southern's passenger service standards and schedule reliability still fall short of its key premium Asian rivals, say analysts, hurting its competitiveness.

Guangzhou is just a two-hour train ride away from Hong Kong, home to Cathay Pacific Airways Ltd., which offers a larger international network and more flight frequencies. In March, Cathay Pacific will add its fifth daily flight into the New York area. Meanwhile, airlines in South Korea and Japan are also vying for more transit traffic from Chinese and Southeast Asian travelers.

All this competition means that China Southern will have to continue to deeply discount its seats to lure new transit customers, at the expense of profits. The airline already offers some of the cheapest fares on tickets between Australia and Europe, even while giving more generous baggage allowances for coach passengers.

"An airline must offer attractive fares to gain transit traffic," said Eric Lin, a transportation analyst at UBS Securities. He says he doesn't see any compelling reason, apart from price, for Asian travelers to go through Guangzhou, given the hub's relatively limited connectivity and inadequate transfer infrastructure.

China Southern on Wednesday inaugurated its Boeing 787 jets on daily flights to Vancouver, providing better seats and passenger amenities to attract traffic. The airline said it filled roughly half of the first 787 trans-Pacific flight, or 100 seats, with transit passengers from India and parts of Southeast Asia.

The carrier in October posted a 3% decline in third-quarter net profit to 2.16 billion yuan (US$355 million), hurt in part by China's slowing economic growth. The carrier is scheduled to release full-year earnings in late March.

Source: Wall Street Journal by Joanne Chiu

Snowfall covers Lushan Mountain, Jiangxi, China

Photos taken February 19, 2014- Lushan Mountain, Jiangxi, China


Source: Xinhua