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TravelSky’s monopoly in China helps boost annual revenues

04/02/2019| 11:33:36 AM|

Like its foreign counterparts, TravelSky has become more profitable on average than the airlines it serves.

In 2018, Chinese state-owned travel technology giant TravelSky generated $1.11 billion (RMB 7,472.1 million), representing an increase of 11% year-on-year.

Like its counterparts abroad — Amadeus, Sabre, and Travelport — airlines created TravelSky. All of the domestic Chinese airlines participated in TravelSky’s birth in 2001, and a few continue to have ownership stakes.

Last year TravelSky’s revenue growth of 11% was slightly less than its overall volume of passengers process, though it was broadly in line with an estimated 11% increase in passengers flying domestically in China. TravelSky has a lock on the data exchanges related to domestic flights. But it would need to grow at a rate faster than the average in passenger growth to suggest it is growing faster in new products, such as the retailing of ancillaries, and not merely sticking with its cash cow businesses.

Like its foreign counterparts, TravelSky has become more profitable on average than the airlines it serves. In 2018, it generated profits after taxes of $394.8 million, representing a rise of 3%, year-over-year. Profit represented about 35% of revenues for the year, in line with average profit at its foreign peers. Domestic and foreign airlines typically earn profits of less than 15% of revenues, at best.

TravelSky has dozens of subsidiaries, and some of them face domestic rivals. Yet in its largest businesses, it is insulated from rivals. However, TravelSky’s insulation from market competition risks creating complacency.

TravelSky has overseas objectives. As Chinese airlines expand flight networks to cover more international destinations, the company has to make sure that its distribution network and services can reach all these places.

A typical company statement was its recent one that its “system is following and anticipating the international distribution trends but also allows us to serve our key market in China with its special characteristics well.”

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TAGS: TravelSky | GDS
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