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this morning, china eastern airlines released a notice through official channels regarding "special handling of passenger tickets for flights 1, 2 and 3", stating that starting from september 22, china eastern airlines will merge with flights 1, 2 and 3. due to the change in the actual carrier, in order to protect the legitimate rights and interests of passengers who have purchased tickets for flights 1, 2 and 3, china eastern airlines has formulated relevant ticket refund and change regulations.

prior to this, china eastern airlines had issued an announcement that it planned to absorb and merge 123 airlines, and 123 airlines would be deregistered in accordance with the law.

123 airlines mainly operates the domestically produced arj21 regional aircraft. after the company was deregistered, tianjiao airlines was the only domestic passenger airline that purely operates regional aircraft.

cancelled after four years of establishment

123 airlines was officially unveiled in february 2020. when it was established, it had a clear positioning: to operate domestically produced aircraft such as arj21 and c919.

on june 28, 2020, comac delivered their first domestically-produced regional jet arj21 to air china, china eastern airlines and china southern airlines. among them, china eastern airlines' arj21 aircraft is managed and operated by 123 airlines.

"establishing a new company can ensure more focused operations, because the maintenance and operation of the arj21 are self-contained systems, unlike other imported aircraft." lin zhijie, an insider in the civil aviation industry, once analyzed to reporters that, in addition, operating independently from the main brand will also facilitate risk divestiture and independent cost-benefit accounting.

as of now, 123 airlines has received 24 arj21 aircraft, and china eastern airlines has ordered a total of 35 arj21 aircraft.

it is worth noting that china eastern airlines has also ordered more than 100 domestically produced c919 aircraft. however, the c919 aircraft are currently operated by china eastern airlines headquarters, and 123 airlines has become a regional airline that only operates arj21 aircraft.

according to data disclosed in china eastern airlines' announcement, 123 airlines lost 173 million yuan in the first half of this year and 584 million yuan in the whole of last year. as of june 30 this year, 123 airlines' net assets were -89 million yuan, which means it was insolvent.

the reporter checked the daily utilization rate of 123 airlines' aircraft and found that in august this year, the daily utilization rate of its arj21 aircraft was only 3.3 hours, which is significantly lower than other models of china eastern airlines. however, the arj21 aircraft is the only regional aircraft model operated by china eastern airlines, and its route network is relatively scattered.

finally, china eastern airlines decided to absorb and merge 123 airlines, and the arj21 fleet was also incorporated into the company's large fleet for unified operation. the company said that this move was to further optimize the company's management structure, shorten the management chain, improve management efficiency, reduce management costs, and benefit the long-term development of the arj21 fleet.

how are other airlines' arj21 operations going?

before china eastern airlines, some new airlines had already adopted domestically produced aircraft when they were established. after all, after the civil aviation administration of china strictly controlled the establishment of new airlines, it was easier to obtain support for the establishment of regional airlines using regional aircraft, especially domestically produced aircraft. tianjiao airlines is a beneficiary of this policy.

tianjiao airlines, founded in january 2017, is wholly owned by inner mongolia state-owned assets and is the last passenger airline approved by the civil aviation administration of china in recent years. after the deregistration of 123 airlines, tianjiao airlines also became the only airline in china that operates pure regional aircraft.

the reporter checked the operating data of tianjiao airlines and found that its daily utilization rate was not high, averaging 4.1 hours in august, which is also the common situation for domestic airlines operating arj21.

the arj21 aircraft is my country's first medium- and short-range turbofan regional aircraft independently developed in accordance with international civil aviation regulations and with independent intellectual property rights.air china, 123 airlines,china southern airlines、china express airlinesseven passenger airlines are operating arj21 aircraft.

according to the statistics of flight steward, the average daily utilization rate of arj21 fleets of seven airlines in august was 4.5 hours, with china southern airlines having the highest utilization rate of 4.9 hours and 123 airlines having the lowest utilization rate of 3.3 hours. this is far from the utilization rate of other trunk aircraft in operation in china, which is often more than 8 hours.

for example, china southern airlines' 2023 annual report shows that the utilization rates of the company's boeing 737 and airbus 320 aircraft are 9.2 hours and 8.9 hours respectively, while the utilization rate of arj21 aircraft is 3.5 hours (the arj21 fleet in china southern airlines' annual report includes the arj21 of its subsidiary jiangxi airlines). the company's hebei airlines also has another regional jet, emb190. the daily utilization rate of its 190 aircraft is slightly higher than that of the arj21, at 4.4 hours.

regarding the current situation where the daily utilization rate of arj21 aircraft of domestic airlines is generally low, several airline personnel revealed to reporters that on the one hand, it is related to the fact that the stability of domestically produced aircraft needs to be further improved, and on the other hand, it is because it is difficult to make money by simply relying on regional aircraft operations in the domestic market.

why is it difficult to make money on branch lines?

in fact, this is not the embarrassment faced by operators of the arj21 regional aircraft in china.

among the 46 passenger airlines in china, only 123 airlines and tianjiao airlines operate pure regional aircraft. china express airlines, the first listed regional airline, as well as colorful guizhou airlines and xingfu airlines, the former "spokesperson for domestic regional aircraft", have introduced trunk aircraft. china southern airlines, shandong airlines and hebei airlines have also gradually withdrawn from regional fleets and focused on operating the trunk market.

compared with mature aviation markets in europe and the united states, my country's regional aviation network is also much smaller. only 15% of domestic flights are operated by aircraft with less than 100 seats on routes of less than 600 kilometers. the domestic regional aviation market, especially routes within 600 kilometers, almost all use relatively larger aircraft models, while 47% of regional flights in the world are operated by regional aircraft, and australia is as high as 81%.

in the view of many industry insiders, the slow development of regional aviation is related to the low per capita disposable income of regional routes and the greater impact of high-speed rail competition. a major problem facing regional routes is insufficient passenger sources. in 2023, 75.8% of regional routes will have less than one flight per day, and the passenger load factor will be 6-7 percentage points lower than that of trunk routes.

lin zhijie, an industry insider, also told reporters that regional airlines cannot make money because of the lack of market demand and the high pricing of regional fares. "in order to allow passengers with monthly incomes of only half of those in first-tier cities to afford tickets that are twice as expensive as those on trunk routes, the government can only use subsidies to reduce the 800 yuan ticket price to 500 yuan, or even 200 yuan."

therefore, if airlines want to make money on feeder routes, they mostly need to rely on route subsidies from local governments. however, due to the uncertainty of local government subsidies and development policies, the cultivation of the feeder market faces the risk of being difficult to sustain.

now, with the mass delivery of the domestically produced regional jet arj21, it is imperative to explore innovative business models and innovative aviation product structures.

in this regard, the marketing department of chengdu aviation, which has the largest number of arj21 aircraft, suggested that placing arj21 at hub airports to compete directly with the trunk lines of hub airports has no advantage, but it can play a differentiated advantage in second- and third-tier cities with aviation development needs. by increasing the frequency of regional feeder flights, the scattered passenger travel needs can be concentrated at one destination, attracting other trunk flights to participate in intermodal transport, creating a secondary hub, and forming a "arj21 + intensive express line + secondary hub + transit connection" model, the aviation market in second- and third-tier cities can be quickly seized.

china united airlines has done a lot of exploration in through-line products and transfer products. it has joined forces with more than a dozen domestic trunk airlines such as air china and china southern airlines to launch through flights and cross-airline transfers to solve the pain points of accessibility in the branch market.

in addition, some industry insiders have suggested referring to the cpa model (capacity purchase agreement) widely used in europe and the united states, where large full-service airlines purchase capacity from regional airlines. at present, the fleet size of the three major domestic airlines is approaching 1,000 aircraft, and the routes operated by arj21 are mostly independent flights or a combination of trunk and regional routes, which can provide capacity supplements and customer sources in the segmented market for the three major airlines.