Going Dutch

In late March, KLM became the first European carrier to offer twice-daily flights between Shanghai and Europe. Yet, as more and more Chinese people embrace air travel, KLM is doing what it can to think domestically as well. Mark Arxhoek, commercial director for Air France-KLM in Greater China, talked to CHINA ECONOMIC REVIEW about the prospects for the Chinese airline industry.

Q: What have KLM’s experiences been with Chinese carriers?
A: In 2001, KLM started its cooperation with China Southern Airlines (CSA). We initially exchanged seats on our Beijing-Amsterdam flight under a block space agreement, and then extended it to code-sharing flights beyond our hubs. CSA got access to destinations in Europe through KLM’s hub in Amsterdam and KLM got access to destinations in China through Beijing. In 2006, KLM and CSA formed a joint venture, which included cost and revenue sharing, but also staff exchanges and aligning commercial policies.

Q: What challenges has that brought about?
A: Understanding one another’s commercial policies and priorities and also the background and culture of the company. Staff exchanges between KLM and CSA have undoubtedly reduced these challenges. Two KLM staff are stationed in Guangzhou at CSA headquarters and two CSA staff are stationed in Amsterdam at KLM headquarters.

Q: What other partnerships does Air France-KLM have planned in China?
A: As CSA has now also joined Skyteam [an international code-sharing alliance], it is logical to expect more cooperation between CSA, KLM and other Skyteam partners. Air France also has a fruitful partnership with China Eastern and is also working to develop code-share routes beyond our hubs. When KLM started its Chengdu operations in May 2006, we developed, with Sichuan Airlines, an initial set of six codeshare routes to destinations in China not being served by CSA. We have since expanded that to 19 codeshare routes in addition to the 26 we have with CSA.

Q: What challenges do Chinese airlines face as they internationalize in the coming years?
A: I think Chinese airlines still have major challenges ahead of them. Securing the right aircraft mix, landing rights and slots, but also the internal challenge of recruitment of pilots [are all issues]. More important is the need to create international hubs that are fed by domestic flights. This is probably the biggest challenge. Chinese airports do not offer the proper transfer facilities to boost this connecting traffic. For example, if you need to fly from Hangzhou to Amsterdam, you check in and fly domestic to Beijing or Chengdu, pick up your luggage and check in again for the direct international flight to Amsterdam.

Q: How balanced are traffic flows between the Netherlands and China?
A: Generally speaking, the majority of the passengers come from Europe, but the share of Chinese passengers is growing year by year. Moreover, new direct routes, such as Chengdu-Amsterdam, have been adopted earlier by the Chinese market than by the European market.

Q: What patterns among Chinese travelers has your hub in Amsterdam seen?
A: Due to the tremendous growth of KLM services to China, the share of Chinese customers has significantly outnumbered the share of Japanese customers in the last few years. The same is true for expenditure amounts of Chinese customers in the tax-free shops at Schiphol airport. The trend that we see is that more and more Chinese customers are so experienced in traveling abroad that they do not feel the need to go around in groups.

Q: How else has KLM sought to increase its presence in China?
A: KLM Club China is a new form of community for business travelers conducting business in and with China. Club China members will be able to see who is traveling where, and share useful tips and hands-on commercial experiences with each other. The online platform allows our members to create their own business network and share valuable contact information. It also offers relevant information on China and gives immediate access to a range of useful services – from finding translators and legal advisors to arranging hotel accommodation and transportation, and setting up meetings.