China airlines are getting geared up to set up base at the new Beijing Daxing International Airport to the south of Beijing, which will be the world’s largest when it opens in 2019. However, the airport’s construction has also brought about competition between Chinese domestic airlines in what Caixin has labelled a “turf war.”

Daxing’s construction has caused a “turf war” between Chinese airlines

Beijing of course already has an international airport, Beijing Capital International Airport located northeast of Beijing, and an additional mainly domestic airport, Beijing Nanyuan. Beijing Nanyuan will close once Daxing opens. Currently, officials hope that by having two large international airports in Beijing, delays and air travel congestion can be alleviated. Daxing will have an annual capacity of 100 million passengers a year by 2040.

Fundamentally, increasing overall passenger capacity in the Beijing metropolitan area will not be a cure-all for the city’s abysmal record for flight delays. Airspace is simply too constrained largely because of the Chinese military, which controls 70 percent of airspace. In short, the completion of Daxing may have little impact on the travel experience of passengers.

Daxing may do little to improve passengers’ experiences

However, the new airport does matter in a big way for airlines, and it represents both an opportunity and a threat. Traditionally, Air China has been the dominant airline in Beijing. Nonetheless, the Civil Aviation Administration of China (CAAC) has allocated 80 percent of Daxing’s future passenger traffic to China Southern and China Eastern, based in Guangzhou and Shanghai respectively.

Further expansion into Beijing likely means intensified competition across the board for Air China, and indeed all other Star Alliance carriers in China. CAAC has made it clear since 2016 that Daxing will be primarily be a hub for Skyteam Alliance members like China Southern, China Eastern, Delta, and Air France-KLM.

Daxing will be primarily be a hub for Skyteam Alliance members

Ideally, China’s domestic airlines want to have a presence at both airports to cast a wider net. The situation in Beijing is somewhat unprecedent in that it seems that CAAC is setting up the Beijing market for passenger travel for competition between the two alliances. By default, airlines at Daxing will have an edge over airlines at Beijing Capital given the former’s larger capacity.

However, Beijing Capital’s closer proximity to Beijing will likely keep the airport and its airlines competitive. China Eastern already controls 50 percent of the traffic flow between Shanghai and Beijing, but Daxing’s location may cut into this as China Eastern shifts to the south of Beijing.

The airport may force airlines to sell off controlling stakes in subsidiaries

However, China Eastern has reportedly considered selling its controlling stake in subsidiary Shanghai Airlines so that it can continue to operate out of Beijing Capital instead of being forced to move to Daxing.

This situation also puts China Southern in a strange position in light of recent events. Much like China Eastern, one of its subsidiaries, Xiamen Airlines, also operates primarily out of Beijing Capital. Moreover, China Southern has also already begun large construction projects at Daxing to ready its hub for Daxing’s opening in 2019 and is planning on investing 14.8 billion yuan ($2.24 billion).

But the airline is also reportedly considering leaving Skyteam Alliance in favor of entering Oneworld. It’s unclear if this would draw the ire of CAAC for being in conflict with the designation of Daxing as Skyteam’s airport in Beijing.

HNA’s Hainan Airlines and its subsidiaries are not part of any of the global airline alliances, so its unclear if it will move its current Beijing hub from Beijing Capital to Daxing.

To make matters even more confusing, most of the CAAC guidelines established last year are still provisional. The State Council has already approved CAAC’s plans but that doesn’t mean that the strict allocation of airlines based on alliance membership will be permanent.

All of this means that airlines are left in limbo without a clear idea of how the Beijing passenger market will function in 2019 when Daxing opens.