China
China Southern sheds premium seats for more profits in economy
June 1st 2019
A premium decrease positions China Southern as economy-heavy airline. Read More » It is rare to get free aircraft, but CSA effectively did. During 2018, the airline retrofitted 31 wide bodies and gained a net total of 1,046 seats, the equivalent of three or four wide bodies, according to the airline’s 2018 annual report. On average, CSA added 34 seats per aircraft.
Airlines globally are densifying their fleets, most prominently with the passenger-despised 10 abreast seating that is replacing nine abreast in the 777. But CSA’s retrofit and seat increase is different. The airline is reducing premium seats in favour of more economy seats. Economy on CSA’s retrofitted 777-300ER is still nine abreast.
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All four first class seats on the 777-300ER were removed in the retrofit, which also saw a decrease in business class from 34 to 28. Premium economy was reduced from 44 to 28. The additional cabin floor space allows economy to be increased from 227 to 305 – a 34% increase. Total seat count increases from 309 to 361 – a 17% increase. To think of the change in another way, the former seat count across all classes is approximately the same as just economy on the retrofit version.
CSA said the changes across 31 wide bodies will generate annual revenue of RMB270 million (US$39 million). The figure belies total improvement. Premium classes have been a challenge for Chinese airlines to sell at a substantial yield or to sell at all. In some cases, CSA is replacing a seat that would have incurred cost and generated no revenue with a seat that will generate revenue.
The FlyerTalk Premium Fare Deals discussion forum often features low business class fares on CSA that are not a pricing mistake. A total round-trip price in business class, including taxes, can be under US$1,500 for routings with various circuity, ranging from Seoul-Rome to Los Angeles-Beijing.
Tan Wangeng, who was CSA’s president until late 2018, said in 2013 long-haul profits for Chinese airlines were “very difficult” and that the airline was preparing long-term measures, such as reducing the first class seat count, CAPA said at the time.
So far, CSA’s changes are most evident on the 777-300ER. The airline has retrofitted existing aircraft and the revised configuration will be installed on new 777-300ER deliveries, some of the last before Boeing switches to the 777X.
CSA has not yet announced any changes to its A380s. The flagship aircraft has eight first class seats and 70 in business. The A380 has 506 seats, 40% more than the airline’s retrofitted 777-300ER. This is despite the far larger cabin floor space of the A380.
The changes are substantial and show CSA no longer feels beholden to offer the prestige of first class and a large business class on its flights. Economics are prevailing. Yet such a small business class cabin shifts CSA’s focus to the economy market. Foreign airlines may benefit from more rational premium pricing as excess inventory exits.
Changes at the Guangdong-headquartered carrier are happening despite the airline preparing to open a second base in Beijing, where business and government traffic has long been seen as lucrative – far more so than CSA’s home base in Guangzhou.
Elsewhere, CEA’s A350 was specified to have first class, but the airline now sells it as a business premium product. Xiamen Airlines, owned by CSA, had first class on its 787-8 but later 787-9s did not feature it.
Removing first class means airlines can improve their business class offering, as Xiamen did. The 787-8 had a 2-2-2 business class, but the 787-9 has 1-2-1, a more premium offering that is becoming standard. The A350 is AC’s first wide body to abandon 2-2-2 seating for more spacious 1-2-1 business class seats. AC is receiving these A350s as its Beijing home prepares for more long-haul competition.
