Destination Guide

China

Enter the dragon

With its 1.3 billion population, China is set to become the world's largest economy - and, says Gary Noakes, business carriers have been quick to wake up to its massive potential

The Beijing Olympics were about bringing China on to the world's stage, but no buyer of business travel will have needed reminding about the country over the last few years.

Well before the games began, China had appeared on the radar of business travel buyers everywhere, thanks to the phenomenal growth of its manufacturing industry and commercial centres like Shanghai.

Trade between the UK and China seems to have limitless possibilities. On the one hand, there is China's formidable manufacturing industry, while on the other there is a consumer market of 1.3 billion people for UK businesses to service.

Facilitating this are the world's airlines and, increasingly, some home-grown ones in China itself. No other country offers such a huge potential market within its own borders. China is slightly smaller than the US, but has more than four times the population, and borders with 14 other countries, plus Hong Kong and Macau. Its population, despite its one-child policy, is growing by around 13 million a year.

China currently has the world's second largest economy but is likely to overtake the US in terms of manufacturing output next year, according to consultancy Global Insight. It had previously forecast that this would happen in 2013, but thanks to the global credit crunch, this has been fast-forwarded.

This growth is being driven by a huge number of cities that for most people simply do not register outside China's borders. Tiny dots on the map represent vast conurbations housing millions. There are around 160 cities with a population of more than one million that are served by more than 450 airports. As a comparison, the US has only 23 cities with upwards of a million people.

The names of the places in China do not exactly trip off the tongue, but they are of interest to the corporate market and savvy airline planners. All of us are familiar with Hong Kong, but how about Guangzhou - less than two hours north of Hong Kong, with the sprawl and population of London and the location of the Canton Fair, the world's biggest general trade exhibition?

Airlines in Europe and the Middle East are eyeing the potential, with several European carriers exploiting the fact that there is a comparatively small selection of indigenous Chinese carriers flying westwards.

In the UK, despite China's vast size, this boils down to just a handful of airlines operating from Heathrow. Air China has only one route, Beijing; while Cathay Pacific serves Hong Kong and China Eastern flies to Shanghai. In addition, RoC Taiwan's EVA Air serves Taipei via Bangkok. However, a fifth player, China Southern, the country's largest carrier, has just announced plans to open an office in London. This is presumably in preparation for the launch of its much-mooted Guangzhou service.

China Southern has been a member of the SkyTeam alliance since November 2007 and, once its plans are made firm, will operate from Skyteam's base at Heathrow Terminal 4.

Skyteam's Air France/KLM already has a strong network to China. As well as the big four (Beijing, Hong Kong, Shanghai and Guangzhou), KLM flies from Amsterdam Schiphol to Chengdu, which has a massive population of 11 million and is a centre for the IT industry, among others. IBM and Microsoft both have factories here, while banking giants such as HSBC are also present.

The Dutch carrier's interest in China is underlined by its KLM Club China, a networking site for members of its Flying Blue frequent flyer programme and of BlueBiz, its SME loyalty scheme. Club China benefits include seminars and a newsletter, plus tips and suggestions on doing business in China.

SkyTeam is anxious to exploit its link with China Southern, which brings the alliance a presence in 105 cities within the country. SkyTeam is marketing a China Pass, offering discounts of up to 40 per cent on itineraries of between three and nine domestic flights within China Southern's network. To cater for the business traveller, re-routing is allowed after the first flight is taken.

Lufthansa, which first flew to China in 1926 and now has 58 flights a week there, claims to be Europe's leading carrier in terms of the number of services to the country. It is another airline that has sought to fill in the gaps to some of the lesser-known Chinese cities from mainland Europe, choosing the Olympic year to launch services from Frankfurt to Nanjing and from Munich to Shenyang.

Nanjing, on the Yangtze River delta, bills itself as Shanghai's alternative gateway. As well as offering a fast train link to Shanghai, Nanjing is also the largest commercial centre in eastern China after its bigger neighbour. Once again, it is not a familiar name, yet is also the size of London and the largest inland port in China. Leading vehicle manufacturers, including Volkswagen and Iveco, have plants there, as does electronics giant Sharp.

In June, Lufthansa began flying via Seoul to Shenyang, in China's north east. With a population of five million, the city is important in the IT, motor and aerospace industries.

One route to China that not always readily springs to mind as far as UK buyers are concerned is via the Nordic countries. Flights from the UK to China head north over Russia. Finnair, which offers connections to four Chinese cities from Helsinki, boasts that its flights beat journey times from Amsterdam, Copenhagen or Frankfurt. SAS offers a similar route to Beijing through Stockholm and Copenhagen.

Travelling to China's major centres via the Middle East is increasingly becoming an alternative to flying via continental Europe, especially as some of the emergent carriers often undercut rates offered by the established players. Emirates and Qatar Airways both offer the big four destinations, while Etihad made its debut in China earlier this year when it began flying from Abu Dhabi to Beijing.

Back in the UK, the air service agreement with China means British Airways serves Beijing, while it and Virgin Atlantic both serve Shanghai and Hong Kong. The agreement was last negotiated in 2004, when each side was given rights to fly to any six points in either country, although both UK and Chinese airlines have been wary of doing so, particularly given the growth of the Middle East carriers. Virgin would, however, like to compete head-to-head with BA to Beijing, but it admits it has neither the aircraft nor the slots at Heathrow to do so.

Despite the handover to China, Hong Kong is still treated as a separate case from mainland China when it comes to handing out route licences. It has, in the last few years, seen the biggest growth in services from the UK, with the addition of Air New Zealand and also Virgin, which now flies up to three times a day. However, in the current economic climate, don't expect much more in the way of increased options - such as the re-establishment of Cathay's Manchester service - in the near future.

Similarly, the launch and swift demise of Hong Kong Oasis Airlines' service to Gatwick showed how risky it is for start-up ventures to try to compete against established brands.

Cathay has an advantage in Hong Kong with its partner Dragonair, which offers connections to more than 20 up-and-coming destinations, boasting a 50-minute minimum connection at Hong Kong, plus the reassurance of a similar cabin service and the bonus of frequent flyer points.

Despite the emergence of other entry points, Hong Kong will still retain its role as a hub for many travellers to China, believes Zinan Liu, sales director of Hogg Robinson Group Jin Jiang.

"Hong Kong has a special status, and growth on the mainland will not replace that," he said.

Paul Cruttenden, Cathay's UK and Ireland corporate sales manager, believes some of China's less familiar cities will soon attract many more travellers through hubs like Hong Kong.

He says there is "another story" to tell about China's secondary cities and names three that are appearing more and more on itineraries from the UK: Ningbo, on the South China Sea, where Nottingham University has established a campus; Wuhan, further to the west, an IT centre; and Chongqing, for its pharmaceutical and motor industries.

Another man who has first-hand experience of China's dizzy growth is Oliver Bonke, who recently spent over four years as Starwood Hotels' man responsible for the Asia region. He warns business travel buyers to quickly become savvier about China, comparing it to South Korea two decades ago.

"It's a mega-economy that is developing its own prowess," he said. "I'm sure that 20 years from now it will build a car that we will all be driving. If you look at where Korea was 20 years ago, who would have bought a Kia or something from Samsung then? I think we will see the same thing in China, except it will happen faster and have more global impact, and it may happen by acquisition - maybe they will buy a Dell or something similar."

The credit crunch means all this is more likely than ever. Indeed, many economists expect China will soon return to its pre-Industrial Revolution status as the world's greatest trading nation, a position it occupied for around 1,800 years.

If so, expect more demand for flights to places that are only just beginning to register on the travel buyer's radar.

The domestic scene

One of the biggest pointers towards the airline industry's interest in China was the inking of a deal for Airbus to open its first factory outside Europe. The plant, at Tianjin, 100km south-west of Beijing, will function as a final assembly line and begin producing aircraft next year.

It will manufacture the Airbus A320, a short and medium-haul aircraft which will have a ready market within China's booming domestic aviation scene.

China has nine state-run carriers of significant size operating internally. The biggest of these are familiar brands that also fly international routes, but there is also Hainan Airlines, the fourth largest, plus a smattering of lesser-known names such as Shanghai Airlines (a Star Alliance member), Shenzhen Airlines and Shandong Airlines.

There are also around the same number of privately owned carriers that have sprung up in the last two or three years following deregulation, some of which occupy the embryonic Chinese no-frills sector.

The first of these carriers, Spring Airlines, was set up at Shanghai's secondary Hongqiao airport in 2005 and currently has a fleet of eight A320s. Speaking at the recent World Low Cost Airlines Congress in London, its chief executive, Zhang Xiuzhi, said government estimates were that China's air traffic would reach 770 million by 2020 - more than four times the current volume.

"Most of them are flying for the first time, most used to take the train and most have paid for their own tickets," she said.

Spring Airlines forecasts a fleet of 100 A320s by 2015. It is currently planning a second base at Zhengzhou, a major textiles centre south west of Beijing, whose airport now has its own budget terminal serving a catchment of seven million people. Others are planned for Xiamen and Kunming.

As affluence among China's vast population grows, there will doubtless be many more developments like this.