Why are China Eastern Flights so Cheap?

This cheap flight phenomenon is not limited to China Eastern Airlines; many Chinese airlines are undercutting fares from Asia to both Europe and North America. I’m currently looking for flights to Asia for next year, and often the cheapest flights I find are on Sichuan Airlines, XiamenAir, or Air China.

But anyway. Why then are Chinese airlines able to offer such ridiculously cheap fares? I attribute this to three factors:

1. Costs. Chinese airlines have very low operating costs compared to the competition and thus can pass that on to consumers. That said, you get what you pay for: Chinese airlines don’t offer the best service, but if you learn to temper your expectations, you’ll be fine.
2. Volume and yield. Unfortunately, for most parts of Asia (the exceptions being Hong Kong, Singapore, Korea, and Japan), products — the amount of money an airline makes on a particular route — are awful. Chinese airlines make up for this by competing on volume, basically dumping a lot of capacity to make money, especially since they have the planes.
3. Brand recognition. It’s only in recent years that Chinese airlines have enormously expanded in many parts of the world. What better way to offer brand recognition and build brand loyalty than by providing cheap air service to any part of the world?

Allow me to use the Philippines as an example of just how Chinese airlines have fundamentally altered the country's economics.

Note that just as recently as a decade ago, flights to the U.S. from Manila were still priced at well over $1000 a ticket. At that time, China Southern Airlines was the only Chinese airline serving Manila, with service to Guangzhou, Beijing, and Xiamen. Most people who would want to fly to the U.S. but couldn’t afford to fly with Philippine Airlines often flew with Northwest (which is why Delta has such a large, loyal Filipino frequent flyer base) with Cathay Pacific.

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Then around the late 2000s, the Chinese airlines started enormously expanding service internationally, notably the Big Three (Air China, China Eastern, and China Southern). They positioned their main hubs in Beijing, Shanghai, and Guangzhou, respectively, as connecting crossroads between Asia, North America, and Europe, which, thanks to geography, apparently worked well for them, allowing them to open up new markets.

In the Philippines, Manila gained China Eastern Airlines in 2013 and Air China in 2015. The secondary cities then followed, led by Cebu, then Clark. Then, once the Big Three came in, the secondary airlines started service (e.g., XiamenAir), adding even more capacity. I was combined with ever more airlines angling to get a slice of the Philippines-U.S. market (and, more broadly, the call between Southeast Asia and North America), fares dropped across the board, so much so that on my last trip to Manila, I paid only $430.

I never would’ve thought I’d see $400 tickets to Asia from the U.S. in my lifetime, but it goes even lower! Heck, on one of my China Eastern flights, I met an elderly Filipino couple who lived in San Francisco. Do you know how much their tickets cost? $350 apiece.

Seeing airfares drop from over $1000 to as low as $350 in a decade is virtually unmatched by any other phenomenon in aviation history. Even deregulation of the U.S. aviation market wouldn’t have led to such drastic fare depression in such a short time. Is it right for consumers? Absolutely. For airlines, though? Perhaps not, and that’s the reality they’ll have to compete in.

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