November 2012 | In the highly competitive aviation industry, airlines have to think differently to evolve and grow. The challenge has been especially strong for European carriers, whose base in the economically troubled Eurozone, coupled with strong competition from low-cost carriers and Gulf-based airlines, has required them to look to new markets for opportunities. As the global economic center of gravity is shifting from Europe and the USA towards Asia, with subsequent increases in income, many European carriers are looking East for growth.
Finnair’s Asia strategy
Along with megacarriers Air France-KLM and Lufthansa, Finnair is one of the most prominent players in the Europe to Asia market. The airline has built a niche strategy around “Asia’s growing market, the best flight connections and cost-competitiveness” and has invested significantly into expansion in the region and into developing its Helsinki base into a prime transit hub.
According to the Center for Aviation (CAPA), Finnair has a near 7 percent capacity share of one-way seats between South Korea and Western Europe, a 10 percent share of Japan to Western Europe (ahead of British Airways), and an approximate 6 percent share of the China to Western Europe.
By virtue of geography, Helsinki’s location makes it the closest European Union gateway for flights between Europe and Asia. Finnair has leveraged this fact by promoting its Helsinki hub as a transit hub for travellers between its 40 European and 11 Asian gateways. According to CAPA, Finnair in the second quarter of 2012 deployed about 51 percent of its capacity (in ASKs) on routes to Asia, and this segment represented 43 percent of passenger revenues.
According to the airline, some 40 million passengers travel between Europe and Asia annually, and about half of these passengers fly non-stop from a major hub like London Heathrow, Frankfurt and Paris Charles de Gaulle with the other half connecting via an intermediate airport in Europe or the Middle East. Finnair strives to be among the three largest operators in traffic between Europe and Asia involving transfers during the trip.
To build on promoting the Helsinki transit experience, Finnair has also collaborated extensively with Finavia, the operator of Helsinki-Vantaa Airport, on the co-branded ‘Via Helsinki’ effort, which, according to Finnair means “shortest possible route between Europe and Asia.” These efforts have included an EUR143 million investment on Helsinki’s Terminal 2 in 2009, as well as assistance for Asian passengers transitting at the airport in their local language; these include Chinese, Japanese and Korean-speaking airport and Finnair ground staff as well as extensive signage in the three Asian languages.
Airlinetrends.com had a chance to fly via Helsinki to China with Finnair where we discussed its latest destination Chongqing, how Finnair sees Asia, and the airline’s plans for the future.
The Chinese air travel market is growing rapidly, with “one of every seven journeys by air” expected to be related to China by 2015. With an estimated 24 million people joining the upper middle class by 2020, demand for air travel will also spread beyond its so-called ‘Tier I’ cities (Beijing, Shanghai, Guangzhou) to China’s Tier II cities. These cities have strong industrial bases and increasing international trade is leading to more demand for international air travel, something with European carriers are responding to.
In the past three years, European airlines such as Lufthansa, KLM and Air France have started flights to to China’s Tier II cities, with Lufthansa expanding to Qingdao, Shenyang and Nanjing, Air France to Wuhan and KLM to Chengdu, Hangzhou and Xiamen.
In May 2012, Finnair became the first European carrier to open a route to the southwestern municipality of Chongqing, which is home to nearly 30 million people, making it the airline’s fourth destination in China, and eleventh in Asia. The route, operated by an Airbus A330-300 four times a week, will bring Finnair’s operations to China up to 26 per week, with the others bound for Hong Kong, Shanghai and Beijing. Qatar Airways is the only other scheduled passenger carrier not from Asia that also operates to Chongqing (and is about to start flights to Chengdu as well).
Finnair in Chongqing
In Chongqing, we spoke with Finnair’s Head of Chongqing & Western China, Robert Gustavsson, who shed light on Finnair’s decision to start operations to the city. In a study by the airline, Chongqing was seen as the “next logical step” in China, for its mix of business and leisure travel growth, as well as the potential it showed for the entire Western China region.
Regarding the business market, Gustavsson mentioned that GDP in the municipality increased 17.5 percent in 2011 and over the past year, trade between the Chongqing area – which is also being reffered to as ‘Chicago on the Yangtze’ – and Europe had doubled to a value of USD 6.2 billion,. Much of the growth was attributed to Chongqing’s automotive, chemical and computer manufacturing industries, with Ford, BASF and HP having a presence in the city. This growth in business activity has resulted in a nearly even distribution between Chinese and non-Chinese business travellers on Finnair’s flights between Helsinki and Chongqing.
Gustavsson also highlighted the growing leisure market in Western China, which is a popular embarkation point for Yangtze river cruises. Furthermore, with growing disposable incomes, an increasing number of ‘Chongqingers’ are looking to Europe as a tourist destination, and Finnair’s local sales office has responded with local marketing initiatives. As flight bookings through travel agencies still prevail, Finnair’s sales team has trained local travel agencies in selling Finnair tickets and worked with regional Chinese corporate clients and tour operators to promote its brand. Finnair also teamed up with the tourism boards of Finland, Iceland, and Estonia to promote the countries as destinations for Chinese travellers from Western China.
Finnair’s focus on Asia has led to the development of several tailored services for its growing Asian customer base. According to Finnair’s Gustavsson, “Chinese language customer service is the most important provision for passengers,” and in response Finnair operates two Chinese call centers in Beijing and Shanghai, staffs a minimum of three Chinese-speaking crew on each flight between Finland and China, and employs Mandarin-speaking tranfer assistants at Helsinki Airport.
Other localized services for Chinese passengers include Chinese meal options both in Business and Economy, Chinese movies, local travel shows highlighting European destinations, and movies and TV series with subtitles in Mandarin.
A long term investment
According to Gustavsson, Chongqing is at the core of a long-term investment in Western China as a whole. In addition to the goal of developing Finnair as the choice carrier for flights to Europe from Chongqing, Finnair also aims to “absorb passengers outside Chongqing from all over Western China to choose Chongqing as a gateway and use Finnair’s flight to Europe.”
This would mean that travellers from the region don’t have to travel eastward to hubs such as Guangzhou or Hong Kong first before flying to Europe, but opt to fly via Chongqing instead. For this reason, Finnair’s Chongqing team in the past months has travelled to six southwest Chinese provinces (Sichuan, Yunnan, Guizhou, Hubei, Hunan and Shaanxi) on a “road show” to conduct media and travel agent seminars in order to build brand awareness across the regional market.
Disclosure: airlinetrends.com was a guest of Finnair on the flight between Helsinki and Chongqing. All opinions in this article are our own.