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Delta eyes major expansion with China Eastern

Editor: Li Kun 丨CCTV.com

07-29-2015 17:47 BJT

By Tom McGregor, freelancer based in Beijing

U.S.-based Delta Airlines has long-maintained an aggressive expansion strategy. The air carrier has routinely pursued M&As (mergers and acquisitions), partnership deals and joint ventures with its airlines’ competitors, both foreign and domestic.

Now, Delta gas its eyes set on the Shanghai-based China Eastern Airlines in order to tap further into the lucrative China market. The Global Times reports that Delta has invested over $US450 million to acquire a 3.55 percent stake of the Chinese air carrier.

China Eastern issued a statement saying, “the move marks a significant moment in the airlines’ collaboration and partnership that will allow the two carriers to compete more effectively on routes between the U.S. and China.”

China Eastern has enjoyed surging profits in recent years, as the company is expected to report a net income of 3.5bn.-3.7bn. Yuan for the first half of the year, which would be a 25 percent increase from the same period last year.

Cashing in on trans-Pacific routes

U.S. President Barack Obama supports measures to ease Visa requirements for Chinese citizens to travel to the U.S. Accordingly; we can expect more passenger traffic between both nations.

Delta and China Eastern have agreed to operate codeshare flights on 30 routes in the U.S. and 43 routes in China, along with 7 trans-Pacific routes linking the two countries.

China Eastern serves the three largest markets with four daily nonstop from Shanghai. Meanwhile, Delta flies into China’s three largest cities with six daily nonstop from the U.S.

Additionally, Delta would receive a Board seat on China Eastern, giving them a prominent voice on corporate matters.

Self-service tech upgrades lure more passengers

The equities analyst firm, Zacks, has upgraded China Eastern shares from HOLD to BUY earlier this month, according to WKRB Channel 13 News, Jacksonville, Fl., saying the airlines is “the primary air carrier serving Shanghai, China’s eastern gateway.”

The Chinese air carrier has also taken steps to improve customer service with hi-tech upgrades. In Aug. 2013, China Eastern selected NCR Corp., a global leader in consumer transaction technology, to provide 40 additional self-service kiosks and multi-vendor on-site support services for its entire fleet of 130 check-in kiosks.

“China Eastern’s strategy has been to continually improve the customer experience,” Tyler Craig, vice president and general manager of NCR Travel. “NCR has increasingly been utilized to bring that goal into fruition, not only through our solutions, but also services.”

China Eastern hopes to provide all passengers with paper-less tickets when boarding their flights in the near future.

Smoother flights with Pratt & Whitney engines

China Eastern is doing more than offering convenient check-in services for its passengers. It signed deals with France-based Airbus, an airplanes manufacturer, and the aircraft engine manufacturer, Pratt & Whitney, while attending the Paris Air Show last month.

According to MobilityTechZone news, China Eastern signed a 12-year V-service Fleet Hour Agreement (FHA) for its purchases of 10 Airbus A320ceo aircraft that come equipped with V2500 Pratt & Whitney engines.

The International Aero Engines AG, a multinational aero engine consortium, has agreed to provide maintenance for the engines.

“Our engines will run longer at peak performances between shop visits,” Feng Liang, vice president of China Eastern, told MobilityTechZone.

Pratt & Whitney Commercial Engines President Gregg Gernhardt added, “China Eastern Airlines has been our loyal partner for the Pratt & Whitney Shanghai Engine Center … this service agreement, continuous the longstanding relationship.”

Delta makes a wise investment

Delta holds a strong position in the U.S. aviation market, but the company seeks to generate more cash flow by targeting the China market. Right now, China’s air travel industry is ranked as the world’s second largest, behind the U.S.

Nevertheless, experts believe the country will grab the top spot within two years, as reported by the Global Times. Delta’s big investment into China Eastern would benefit both air carriers as they utilize each other’s strengths to fly the friendly skies.

 

( The opinions expressed here do not necessarily reflect the opinions of Panview or CCTV.com. )

 

 

Panview offers a new window of understanding the world as well as China through the views, opinions, and analysis of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

Panview offers an alternative angle on China and the rest of the world through the analyses and opinions of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

 

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