Air China ends Shanghai-Chengdu-Bangalore

Yesterday, Sunday, August 4th, marked the final nonstop flight for Air China limited, the world’s 10th largest airline by passenger traffic, between Bangalore and Chengdu. Flights have been zeroed out from the global distribution system (GDS) and are no longer bookable via AirChina.com. The nonstop flights, which began in early 2010, had actually been increased in frequency by Air China from twice to thrice weekly on March 31st, and had been planned to operate as thrice weekly flights until late October. Service was offered on 128 seat Airbus A319 equipment in a 2-class configuration (8C/120Y), and was structured as Bangalore-Chengdu-Shanghai Pudong and return. Flights departed Bangalore Wednesday, Friday, and Sunday and arrived in Bangalore on those same days of the week after departing Shanghai Tuesday, Thursday, and Saturday. The same plane journey from Shanghai to Bangalore took over 7 hours and 40 minutes to complete in either direction.

It is surprising that Air China elected to cancel services between Bangalore and Chengdu given the strong business ties between the two cities. Bangalore is India’s information technology (IT) hub, while Chengdu is China’s electronics manufacturing center; and several multinational tech corporations have major operations in both cities. In particular, this route was often dubbed the “Cisco-Huawei Express”. Networking Equipment Manufacturer Cisco’s “East” Headquarters are located in Bangalore while their largest manufacturing base in China is located in Chengdu. Meanwhile, electronics manufacturer Huawei has a major IT research and development (R&D) center in Bangalore and massive manufacturing operations in Chengdu (as does rival Chinese telecom firm ZTE). These firms often formed the base of demand for the nonstop services, and when combined with the incremental demand between Bangalore and China’s financial capital of Shanghai, the route seemed to be a strong performer for Air China.

But global macroeconomic conditions have certainly shifted in the past few months. Both India and China are seeing slowdowns in growth that are causing tapering in travel demand between the 2 nations – as firms scale back expansion plans and begin to curtail employment growth. India’s projected GDP growth for 2014 has fallen to a new low of 5.2% (after running at 8% or above for nearly the last decade; even through the global financial crisis) tied to a similarly projected GDP growth for China of just 6.9% in 2014, the lowest total in more than 20 years. In addition to these macroeconomic factors, Cisco, a major US manufacturer of Telecom equipment, is also facing a major slowdown in its core market, the US, as firms increasingly turn away from its services and put off purchasing new network equipment due to uncertain economic conditions. Even in India, the economic slowdown is contributing to a reduction in demand for telecom equipment. All of these factors certainly contributed to a reduction in demand for the route.

Beyond the macroeconomic forces, there is increasing tension between China and India thanks to labor disputes and border issues in India’s Northeast. Additionally, ZTE and Huawei are coming increasingly under suspicion of playing a role, if only indirectly, in increased Chinese hacking of Indian government web servers, thanks to their close ties to the Chinese government. The added security concerns have led to increased scrutiny for ZTE and Huawei – and forced the two firms to cut back on their Indian operations. Given the relatively close ties between the Chinese government and Air China, these political disputes may have also played a role in the cancellation of the route.

Air China will continue to service India with 7 flights per week; 4 weekly Mumbai-Chengdu-Shanghai Pudong on board the same Airbus A319 equipment, and 3 weekly Beijing-Delhi on-board 301 seat Airbus A330-300 equipment in a 2-class configuration (30C/271Y). Beijing-Delhi had previously been increased to 4 weekly till October 26th, but those plans appear to have been scrapped.