The Chinese company buying into Virgin can give lessons in service to Australian airlines

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Hainan Airlines, part of the HNA Aviation Group which is buying a stake in Virgin Australia, is a world beater when it comes to service quality.

According to calculations by Associate Professor Rico Merkert of Australia’s Institute of Transport and Logistics Studies, Hainan ranks first in the world jointly with Singapore Airlines and Qatar while Virgin and Qantas are equal 13th.

HNA Aviation Group is paying $159 million to lift its stake in Virgin Australia to 13%. Virgin says the deal will bring with it access to the rapidly growing Chinese travel market.

Hainan Airlines is also one of the few certified as a Skytrax 5-Star airline for the quality of its onboard service and for its home base airport.

Hainan business class. Image Supplied.

Researchers at the University of Sydney Business School’s Institute of Transport and Logistics Studies developed a new formula to measure efficiency of airlines which includes passengers per number of aircraft, seat kilometres flown, fleet, staffing levels, perceived services levels and profitability.

Hainan gets extremely positive passenger reviews and its service is described as outstanding.

However, Associate Professor Merkert says Australia’s major airlines are among the most efficient in the world.

“Qantas was near the top in all of the single efficiency measures that we established, so overall Qantas did quite well,” he says. “Virgin Australia didn’t do as well but was still better than the average.”

Source: Institute of Transport and Logistics Studies

He also said that the two airlines were not only among the safest airlines globally but were also well prepared to weather market and oil price fluctuations.

“Both engage in fuel hedging,” he says. “They also engage in foreign exchange hedging as quite a lot of their cost and debts are serviced in US dollars. They also hedge interest rates and to some extent cash flows.”

The research also found that higher levels of customer service did not necessarily translate into greater profitability and nor do mergers which create airlines that are too large.

“It was generally thought that a very high quality product would lead to repeat business, loyalty, higher yields and hence greater profits,” says Merkert.

“However, Virgin America for many years was featuring very high in all quality rankings but never made much profits out of that exercise. At the other end of the spectrum you have Ryanair, providing a very low level of service but cheap fares and customers come back and they make huge profits.”

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