OTT Airlines, China Eastern’s Odd New Subsidiary

Filed Under: China Eastern

China Eastern has today revealed details about a new subsidiary they’re launching. We knew this was coming, though the whole concept has to make you wonder.

China Eastern has ordered planes from Comac

Historically China Eastern has exclusively operated Airbus and Boeing planes, though later this year they’ll take delivery of their first-ever plane from Comac, an Aerospace company owned by the Chinese government.

If China has their way, they’ll eventually be competing with Airbus or Boeing, or at a minimum will be able to supply planes for their massive domestic market.

Looking specifically at China Eastern’s order for Comac planes, the airline has ordered

  • 20 Comac C919s, which is a narrow body plane that seats around 170 passengers, and is intended to compete with the Airbus A320 and Boeing 737
  • 35 Comac ARJ21-700s, which is a regional plane that seats around 80 passengers

So far these planes have almost exclusively been ordered by Chinese airlines. It more or less seems like the government is pushing these on airlines. In August 2019 Air China, China Eastern, and China Southern all placed orders for the ARJ21 on the same day, and I imagine that’s not a coincidence.

Note that Comac has had significant delays with these planes, and the C919 program is running five years behind schedule, and reports suggest that there’s no end in sight for these problems.

China Eastern creating subsidiary for these planes

We’ve known that China Eastern would create a subsidiary specifically for these Comac planes, and today we learned the details of that.

Later this year China Eastern will be launching OTT Airlines, which will exclusively operate these Comac planes. “OTT” translates to “one two three,” and it will be the first commercial airline to exclusively operate Comac planes. As the company explains:

“OTT can be understood as ‘on time travel,’ meaning that the journey is always on time. It can also be understood as ‘over top travel,’ implying that we will offer an incomparable flight experience to customers.”

Riiiiight…

OTT Airlines will primarily operate domestic flights in the Yangtze River Delta and nearby regions.

The airline will be taking delivery of their first ARJ21 later this year, and then eventually the C919 will join their fleet as well. China Eastern is expected to be the launch customer for the C919, but who knows when that plane will actually be ready to enter service.

What’s the logic of this subsidiary?

I could understand if China Eastern were creating a subsidiary exclusively for the smaller regional jets, but I do find it strange that they’re essentially putting all Comac produced planes in one subsidiary.

This wasn’t the plan in the past, as China Eastern was supposed to take delivery of all of these planes directly, and not for a subsidiary.

The truth is that I don’t know what to make of this, though I do find it a bit strange. I’m not sure what the logic is, though a few things come to mind:

  • Is the airline worried about the operational reliability or safety of these planes, and wants to separate this operation sufficiently from China Eastern’s brand?
  • Are there regulatory concerns about selling connecting tickets (including through partner airlines) on planes that aren’t certified by most safety authorities around the world?
  • Does China Eastern want to do a side-by-side analysis of maintenance costs, reliability, etc., to further get a sense of whether Comac is a real alternative to Airbus and Boeing?

I’m sure there are plenty of other possible explanations, but those are the first that come to mind.

Perhaps what’s telling here is that I haven’t actually seen anything about what will make OTT Airlines different other than the planes — it doesn’t sound like China Eastern is planning a proper ultra low cost carrier or anything.

I can’t think of any other airline that launched a subsidiary with the express purpose of operating planes from a new manufacturer.

Bottom line

It’s interesting that China Eastern has changed their mind about what they’ll do with their China-built Comac planes — rather than having them join China Eastern’s fleet, they’ll instead form a new subsidiary with them.

I’m not sure what exactly their motivation is, though I do find it curious. Then again, it’s not like Boeing nowadays has a reputation for quality and transparency, so perhaps it’s not fair to be too critical of Comac.

What do you make of China Eastern launching OTT Airlines? Would you fly with them?

Comments
  1. Cue the follow up blog within the next 2 weeks that OTT had been delayed due to economic conditions from Coronavirus.

  2. It’s not so hard to understand. Nobody really knows how stable and safe the Comac planes are at this stage, so operating them under a different brand name can prevent the backlash against MU’s reputation to a certain extent if something terrible indeed happens. More of a marketing approach I guess.

  3. Another reason can be to pay the crew operating COMAC planes on a different scale than other MU aircraft and save on crew costs.

  4. I think the logic is driven by economics. Tickets on the new planes would have to be priced at a low enough level, at least until the planes have proven their reliability, to attract passengers, without affecting MU’s overall business and profitability.

  5. So in China there is an perception, whether justified or not, that western products are always better. It seems that they are trying to prevent a back lash from a section of their customers who are not so adventurous and wanna see how it goes. That being said I also know Chinese people who are looking forward to trying this new “Made in China” plane. Just thoughts from a Chinese person.

  6. China Eastern already had a low cost airline called China United Airlines. They have a interesting strategy in that they operate to a lot of smaller cities/airports that is exclusively served by CUA, including their original base in Beijing Nanyuan (NAY), which has closed after the opening of PKX.

    Aside from COMAC planes, I believe OTT is also suppose to take over China Eastern’s business jet portfolio according to some Chinese sources that I have read.

  7. Death on US made aircraft in 2018-2019: 346 souls over 2 billions passengers carried (4.3 total with ~50% by boeing)
    Death on US conventional railroad since 2012: over 30 souls
    Death on US HSR (brightline since 2017): 41 souls

    Death on Chinese HSR: 40 out of 7 billions passenger carried in the last decade

    I look forward to a safe, large and cheap chinese plane.

  8. @jkjkjk – So you are blaming US made trains for the deaths on Brightline? Where the trains defictive (which are made in California by a German company)? No, I don’t think so. All of the deaths have been people who walked around crossing gates when they were down. How in the heck is that the fault of the train equipment? I have never seen a train deliberately try to run someone over.

    Oh and Brightline is hardly high speed rail.

  9. Good to know which carrier to avoid. When the first plane crashes, expect the government to bury the wreckage within days because of “security concerns.”

  10. As a wholy owned subsidiary like Shanghai airlines. Can we continue to earn miles on programs such as flying blue? Assuming ticket is not booked under MU code.

  11. When searching their names, the worst single plane accident history is in the 5th rank of the results.
    God bless their choice of names /s
    Also, C919 won’t be flying soon anyway. Marketing ploy more than anything

  12. These pieces of crap will also be forced onto African and South American countries who were stupid enough to join in on the Belt and road initiative. Uncle Xi will have the state make the loans to the states who will then purchase these and go further in debt. 2 birds 1 stone. Further enslaving poor states to extract and pillage their natural resources and at the same time prop up state owned enterprise . Oh and good propaganda at home for the lemmings to show the triumph of the command economy.

  13. To be fair, I believe that offering an “incomparable flight experience” is entirely believable.

  14. @Big G “further enslaving poor states to extract and pillage their natural resources ”

    Looks like You fully understand why you can enjoy Guatemalan bananas like a monkey in the US Of A

  15. An acronym that just begs for interpretation. OTT: Oh, There’s Trouble

    A pity @Sean M is not here. He loves his acronym gobbledygook!

  16. It is Chinese Government policy that Chinese companies should support Chinese products , so YES ,these planes will be forced on the Chinese airlines.

  17. I’d rather fly the Max every time I had to fly than fly a Chinese or Russian Built plane.

    Historically no Airlines outside of the USSR, Cuba, North Korea or China have used them. Which says a lot to me.

  18. @jack Interjet in Mexico operated some SSJ100s. I think they’re mostly grounded at MEX at the moment, but they were flying fairly recently, even on US routes.

  19. As a chinese I think i can give a sense of what the new 1-2-3 aka OTT airlines means.

    The name literally translates into one-two-three, but dont take those words literally.

    It came from ancient chinese philosophy of taoism from the book of ‘Tao Te Ching’ by one of the greatest Chinese philosopher Lao-Tzu. The full quote goes as ‘taoism is unique, which makes the two of yin and yang, and as yin and yang reach the balance of harmony then everything is born out of it.’

    One here means the unique one, referring to taoism itself;
    Two here means the two chi of yin and yang;
    Three here means the anything that is made by yin and yang;

    In a nutshell, the name carries the ancient Chinese philosophy of believing everything in the universe is at its best when harmony and balance is reached.

    Also I believe the thought behind of putting C919 under a sub brand is more from a corporate and business perspective, and even as a Chinese myself who is proud of our own aircraft taking off in the sky I would have to say that C919 is no where near being a competitor of A320/B737 anytime soon, for instance that both airbus and boeing has massively applied composite on their aircrafts and C919 is still fully metal, which is a considerably less economical choice.

  20. The name reminds me of One-Two-Go Airlines in Thailand, a subsidiary of Orient Thai Airlines, which had a fatal crash in 2007. The aircraft was registered HS-OMG, no less!

  21. The C919 is a rehashed DC-9 literally using old MD machinery that is decades old. There are so many questions hanging over this aircraft that I wouldn’t fly in one for all the coronavirus vaccine in China (if it existed). China doesn’t have an established successful commercial airliner industry aside from the Boeing and Airbus assembly plants. It’s approach to everything from manufacturing to the theft of intellectual property to ridiculous land and sea claims to its handling of a pandemic is exposing it as the paper tiger it is. For all that’s wrong with America, and there’s much, it’s innovative, industrious and hard working. Boeing will fix the 737 Max issues, China will paste over the deadly issues with its faux new C919. Each approach reflects the heart of each nation.

  22. The logic is very simple.
    1. It allows OTT to secure air worthy certification from Chinese authorities for (1) the ARJ21 (2) the C919 and eventually (3) the C929. Sometimes a cigar is simply just a cigar!
    2. Putting the ARJ21 and C919 into service allow China to demonstrate the safety and reliability of the planes to both customers and potential customers. Shorten product acceptance process.
    3. Allows OTT to set up the required and necessary logistic and maintenance facilities.
    4. Allows OTT to set up training facilities first for own staff, later for customers.
    Brilliant!!!!

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