A seriously important move for all airlines in China will be if the government gives China Eastern Airlines permission to sell a stake to Singapore Airlines (SIA). Apparently this is a done deal and only requires some official stamps and permissions.

The first and easy result is that China Eastern, which has been loosing serious money - a net loss of 46% in the first quarter of the year of RMB510.9 million ($66.3 million), after losing RMB3.3 billion in 2006) will probably be turned around and with SIA probably having 25% of the stock, will become a viable airline. The story is SIA is paying $770 million for the shares. If it paid nothing China Eastern Airlines would still have a bargain.

But this deal has far, far wider implications than the effect it will have on China Eastern Airlines. Most airlines of China do very well by economy passengers. The freeing up of nearly double the airspace by decreasing vertical separation in November will make them even better. Where none of them work very well is at the point end of the plane.

The days when carriers just bothered about cattle class are well over. Airlines are redefining themselves as ultra-cheap carriers with zero frills. They get you there safely and on time and that is it. And airlines which carry passengers, especially business passengers, in a style that was not even dreamed of in Xanadu.

This is the area where the war for profits will eventually be fought: providing superior service for business passengers. At the moment there is no airline in China that is even in the race.

Outside of China airlines like Emirates have made it from practically a standing start and cornered significant parts of the business market despite the fact it works through Dubai, arguably the least attractive airline in the world although Harare fights hard for the title.

No airline in China has seating for which it is seriously worth paying a premium. In this area SIA is the acknowledged leader. If SIA can bring some its style and efficiency to China Eastern then the other airlines in China will have to pay serious attention to the pointy end where the high yield passengers sit. It is a fascinating development and the way it plays out will affect aviation in China for the next twenty years.
Source: Channel News Asia