The passenger base in China is growing faster than the airline industry predicted, and that’s inspiring airlines to adapt their businesses to cater to this powerful and expanding market.
According to the latest revision of the International Air Transport Association (IATA)’s 20-Year Air Passenger Forecast, residents from China and other Asia-Pacific countries, will represent half of the 7.8 billion passengers forecast to be traveling by air in 2036.
This growth is partly owed to more affordable airfares; IATA projects the average round trip in 2018 will cost $355 — about 64 percent lower than the average fare in 1996 when adjusted for inflation. But that only paints part of the picture.
China’s fast-growing middle class is a top reason why the country is expected to replace the U.S. as the world’s largest aviation market by 2022. More economic prosperity means greater mobility — and the Chinese are traveling in record numbers. In 2017 they reportedly took 4.5 billion domestic and international trips. That’s nearly three times China’s total population.
As Chinese people are traveling in record numbers, they’re also using internet-connected devices en masse, and that’s causing a significant shift in the airline industry.
Understanding the Needs of Asian Markets
As airlines adopt inflight Wi-Fi and capitalize on the personalization capabilities of inflight entertainment systems, they’ll soon be finding themselves moving at warp speed to meet the demands of Chinese passengers. Asian-Pacific, and particularly Chinese, customers rely heavily on mobile platforms in their day-to-day lives and carry those same expectations when they travel.
Ericsson’s Mobility Report shows that mobile subscriptions in China reached over 1.4 billion in Q4 2017, with 23 million new subscriptions in Q4 2017 alone. That makes it the leading growth market by a broad margin. Being connected is so integral to these travelers’ experiences that it’s challenging travel and hospitality companies to modernize services and even predict future demands. With that in mind, airlines have been making significant changes to their technology, inflight services, customer support and even fleets to provide a customer experience that’s as high-tech as many of these new travelers are.
“China is more advanced than the EU or U.S. when it comes to mobile technology. That’s why you have to offer Wi-Fi onboard. You have to be able to connect throughout the journey. That’s what they expect and that’s how we build a platform that also creates loyalty. We are relevant to them and their lifestyles.”
Finnair Chief Commercial Officer
How Airlines are Preparing for What’s to Come
China’s digitally connected and aspirational middle class represents 300 million consumers — and that number is growing. Companies looking to compete for customers in the region are adapting and preparing to meet their hyper-connected requirements.
That includes the design and functionality of flight-search engines and booking tools, brand interactions, payment options and the overall passenger experience.
“You have to be on the Chinese social-media [and digital] platforms,” Finnair Chief Commercial Officer Juha Järvinen explained at ACTE-CAPA.
Finnair has taken a number of bold steps to establish strong ties with Asian consumers. Those include a presence on the popular social-media platform WeChat and accepting payments through Chinese mobile payment platform Alipay. “Young affluent business men and women in Beijing or Shanghai are very independent. They want to travel and want to show their friends where they are and be relevant in their platforms,” Järvinen continued.
The need to be connected also extends to the flight itself. For airlines’ inflight experience, the bottom line is simple: Connectivity — on its own as well as an enabler of other inflight services — is crucial to gaining and maintaining these cohorts’ loyalties.
“China is more advanced than the EU or U.S. when it comes to mobile technology,” said Järvinen. “That’s why you have to offer Wi-Fi onboard. You have to be able to connect throughout the journey. That’s what they expect and that’s how we build a platform that also creates loyalty. We are relevant to them and their lifestyles.”
Finnair’s strategy in Asia is working. The airline reported notable increases in capacity and traffic on its Asia routes throughout 2017. Meanwhile, Finnair intends to add a seventh Chinese city, Nanjing, to its extensive network in 2018, the airline recently said in a news release.
Industry Innovators Prepare for New Demand
Airframe manufacturers are readying themselves for more aircraft orders, including regional jets, narrow bodies and ultra-long-range wide-body planes. Boeing estimates the Chinese market alone will need over 7,000 passenger planes over the next 20 years. Airbus forecasts a more conservative but still considerable 6,000 new planes for China between 2016–2034. A negligible percentage of these will be freighters; the majority will be single-aisle passenger planes and regional jets.
Industry innovators have established ties in China helping to advance important services. “Panasonic Avionics is the first and only company to operate inflight connectivity services in Chinese airspace through various telecommunications partnerships including China Telecom Satellite,” says Eddie Hsieh, Sr. Director at Panasonic Avionics Corporation, responsible for connectivity in China.
Hsieh explains the company is working with multiple airline customers in the China region – Air China, Cathay Pacific Airways, China Eastern, China Southern, Hainan Airlines, Hong Kong Airlines, Juneyao Airlines and Xiamen Airlines – to offer their passengers a memorable experience. “They can watch movies and television, listen to music or connect to their favorite social media applications like WeChat,” he adds.
Most globetrotters prefer to stay connected to their friends and families even when they’re traveling 10,000 miles away from home. This is a global phenomenon, but it’s particularly pronounced in modern Asian travelers and Chinese consumers in particular.
As Kai-Fu Lee, a tech investor in Beijing and the former head of Google’s Chinese operations, told the Economist: “Innovation moves faster here.