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QUEST MEANS BUSINESS

Quest Focuses on Chinese Airlines. Aired 4-4:30p ET

Aired December 27, 2017 - 16:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, CNN HOST: A sleeping giant is awake in travel. It's China, the country with the biggest human migration on Earth. The Chinese made 3

billion domestic trips in 2017 and that was just to celebrate the Chinese New Year. China's major carrier, Air China, China Southern, China Eastern,

all stepping up to meet demand.

As everyone says the sky's the limit. Hello and welcome to CNN Business Traveler. I'm Richard Quest this month reporting from Shanghai, home of

China Eastern Airlines. One of the big three state owned carriers here. And the focus of this month's program. We're looking at the growth of

Chinese travel both inbound and out and they're all played by the three national airlines.

They may be giants at home but only now are they truly spreading their wings worldwide. It's a busy afternoon at the Tom Bradley Terminal at Los

Angeles airport. And I'm one of the business travelers heading to China. China has now surpasses United States as the world's largest business

travel market. That alone is a seismic shift.

I've been to China on many occasions but this is the first time I've flown there on one of the big state owned carriers. Hello.

UNIDENTIFIED FEMALE: Hello.

QUEST: Checking in. Thank you. Thank you very much. Thank you. Shanghai, next. The Chinese carriers now have more roots between their home

country and the United States. More roots between China than the U.S. carriers themselves. They're slashing their fares to be competitive and

upping their service to be as good as the best.

When it comes to attracting international passengers, all the Chinese carriers have had to improve their product, haven't you?

HO: Yes. You know, because China - Chinese people they are getting richer and richer. They have strong willing one to have their high quality of

life. So, China Eastern, we upgraded our aircrafts, our products and our service to meet this part of the requirements. So, we have 20 percent 0007

and the next year we will also introduce 350-2-900 and a 787-9.

So, these new aircraft will keep our high quality for the productive service.

QUEST: Dong Bo is the Chief Marketing Officer at China Eastern. He shows me some of their roots. China is already the biggest business market in

aviation and by the end of the next decade will be the largest aviation market in world. Are you ready for that?

BO: Yes.

QUEST: So, let's demonstrate the huge potential for growth in the Chinese market and let's use the airlines favorite snack, a packet of peanuts.

Think of this as the population of the United States, 330 million people or so, where roughly half have passports at the moment.

China, on the other hand, is four times the size, with a population of 1.2 billion. At the moment, in China, only six percent of the population have

passports. Image that Chinese numbers eventually reach same as the U.S. where half the population has passports, the Chinese travel market suddenly

becomes vast in comparison to the U.S.

As travel analyst, Gary Bowerman, sees it, the growing Chinese affluence is behind the wave and it's not just domestic travel.

GARY BOWERMAN, TRAVEL ANALYST: The global tourism industry now has pivoted towards China. It is the growth engine across all aspects and it

encompasses everything from backpacking to super luxury and business travelers obviously are a very, very strong component of that.

QUEST: Getting a business or tourist Visa for China can be a rather laborious process. Applying for it, and in certain cases, you have to show

up in person. That's me, waiting outside the Chinese Consulate in New York as they process my journalist Visa.

Now China has something called the Transit Visa. Makes it easier to visit China along with a fiction that you're actually in China on a layover to

somewhere else. Visitors from 50 plus countries can stay up to 72 hours.

In some cases long without a formal Visa, however, there is a catch. You cannot fly directly back to your point of departure, because in theory,

you're in transit, so you have to go back via a third country.

BOWERMAN: A way for people to be able to stay and do business and perhaps spend some money in the economy without the hassle of a Visa. Whether it

will work in future remains to be seen because so many other countries around the world now have a priority access, so we'll have to see how that

works.

QUEST: Time to see Shanghai and I have the perfect way, motorcycle with a side car. Drive on. Shanghai Insiders is a company offering sidecar

tours. This is a wonderful way to see a city.

Driver, (Mataus Wen) has been in Shanghai for more than a decade. Who mainly takes your rides?

(MATAUS WEN), DRIVER FOR SHANGAI INSIDERS: A lot of Europeans, a lot of French, German, Americans as well. Quite popular with Americans.

QUEST: How many trips do you do?

(WEN): Right now it's pretty high season because the weather is really good in Shanghai, so it's a lot of people coming over. But, almost

everyday. The first one who started here was (motorbike) which started a year ago in April '16 and they installed 10,000 bikes on the street.

QUEST: Good God, 10,000?

(WEN): That's nothing. Now it's one million.

QUEST: This is lovely. A most enjoyable ride.

China is pulling ahead of it's rivals in global travel and China Eastern is leaving nothing to chance.

(COMMERICAL BREAK)

QUEST: There's a travel revolution happening in China and it's not only the sheer number of people on the move. The three biggest carriers are

expanding. China now is probably having the biggest influence on global travel.

This is Shanghai, China's biggest city and a major commercial sector, whether a visitor or a business traveler to Shanghai, the water front known

as The Bund, the World Financial Center are major attractions here.

In search of a tangent (ph) of (ph) city of Shanghai, there's only one way to appreciate what's down here and that's from up there. It's also the

headquarters and hub for China Eastern, one of the three state owned airlines.

UNIDENTIFIED MALE: Shanghai is our main hub, Kwin (ph) Meang (ph), Sheai (ph), Beijing, another three big hubbers (ph).

QUEST: At China Eastern's operation center, the marketing and key critics key partnerships as part of the growth strategy. Delta for instance owns

3.5 percent of China Eastern.

UNIDENTIFIED MALE: For the China Eastern, we have 110 million passengers annually.

QUEST: One hundred and ten million?

UNIDENTIFIED MALE: Yes.

QUEST: What percentage is domestic, what percentage is international?

UNIDENTIFIED MALE: For the percentage 82 is domestic. And 18 percent for international and include to Taiwan, Hong Kong, Makall (ph).

QUEST: So most of your passengers are flying within China.

UNIDENTIFIED MALE: Yes.

QUEST: Eighty percent is within China. But that means 20 percent is flying internationally and connecting elsewhere.

UNIDENTIFIED MALE: Yes.

QUEST: As it increases it's footprint, China Eastern is focused on safety. We were invited to see this at their new training center.

UNIDENTIFIED MALE: In aviation, safety is very high priority. Over (ph) there (ph).

QUEST: The training centers general manager is emphasizing the need for all types of training.

UNIDENTIFIED MALE: Those cases may never happen in a real case of the you know, a life. But we do prepare for the emergency. So everybody --

everybody prepare for that case. No -- no exceptions.

QUEST: The Chinese carriers know it'll take more than just routes and planes to entice passengers on board. So service has to become a priority.

UNIDENTIFIED MALE: We train our customer service person or captain and flight attendants differently. So each time when people get into aboard

the aircraft, they will receive a very warm welcome and different attitudes to treat them.

QUEST: What are you teaching them?

UNIDENTIFIED FEMALE: How to prepare the drinks and their entree.

?QUEST: And how long will the training be?

UNIDENTIFIED FEMALE: Almost three months.

QUEST: So they're nearly ready to fly?

UNIDENTIFIED FEMALE: After three months.

QUEST: Upping their service with better food and drink. And some unexpected nice if not just a big state three carriers stepping up. Hainan

Airlines, China's largest privately owned carrier, is also expanding. When we spoke to Hainan's Xiao Fei last year, Hainan was focusing on secondary

routes to smaller cities.

XIAO FEI: We're talking about five, six, seven million population. So the point of point demand is huge. We have nearly 30 percent of market sharing

in Sieon(ph). So that means Sieon(ph) is a viable hub for Hainan Airlines. We flew on Sienon(ph) to Rome, to Paris, to Sydney. We flew from Chong

Chen to Rome and when flew from Chanoisle(ph) to Los Angles.

QUEST: The next frontier for China, building it's own planes. And earlier this year China's home built Comac C919 passenger jet had several test

flights. The planes expected to go into service around 2020.

UNIDENTIFEID MALE: It will add another level of competition into the market. China has been testing its passenger jet for a long time. It's

had ambitions to build a passenger jet for many many years. And it's in the final stages of testing.

UNIDENTIFIED MALE: It will have competition because the global aviation sector is dominated by a number or large players, China wants to be a part

of that, it wants to generate it's own revenues, its wants - it's own ability to transport it's own passengers around the world and to sell

planes around the world.

QUEST: The facts speak for themselves. It's predicted by 2020 more than 200 million Chinese will be traveling abroad. And with that there's a new

business afoot.

UNIDENTIFED MALE: Can we do this?

QUEST: If you're a lady probably not.

UNIDENTIFED MALE: Even if you're a man.

QUEST: Well I don't know it's a - sorry I've got - I'm wearing comfortable shoes. Showing Chinese who want to learn the business of global etiquette.

Don't ask.

(Commercial Break)

QUEST: In a city of more than 24 million people I've managed to make my way to a place of tranquility in Shanghai, a place where traditions still

play out in the middle of modern life. This fusion of old and new can be seen all over the city. For example this decade's old landmark, the

Fairmont Peace Hotel. Now this is what you call a floral arrangement. It's seeped in history and now bears witness to the Chinese travel

evolution, the perfect time and place for me to explore culture and custom.

Here we go, up to the hotel's iconic rooftop terrace, it's a lovely day, for a lesson that more and more Chinese travelers are requesting as they go

overseas. You're all for folding napkins.

(RUE DE BERNADO): You fold your napkin either in triangle or in half, I should be able to press my hand here under the chin and you should be able

to bring the food to your mouth.

QUEST: There's more going on here than table manners as I heard from the etiquette expert, Chinese travelers are looking to bridge a cultural gap.

(RUE DE BERNADO): They're (ph) really traveling whether it's for business or for pleasures, (inaudible) once, they want to travel to us certain one

or four (ph) times, they maybe have the children studying abroad so they may also want to buy house elsewhere so they want to be able to fit in

their new environment.

QUEST: What's the biggest thing when it comes to dining that the Jews say they need to know?

(RUE DE BERNADO): Their favorite posture (ph) some thought (ph) I repeat but I insist.

QUEST: You insist?

(RUE DE BERNADO): Insist.

QUEST: You insist?

(RUE DE BERNADO): I do insist on the type of posture.

QUEST: It's not the only bit as I am about to find out. What I would want to do this.

(RUE DE BERNADO): You're a baby; it's a baby style (ph).

QUEST: You are sitting there in an extremely uncomfortable looking position.

(RUE DE BERNADO): Definitely not, it's a matter of getting used to it or not.

QUEST: Is it ever permissible to eat with your fingers?

(RUE DE BERNADO): Can we do this?

QUEST: You can if you really want to.

(RUE DE BERNADO): Can we do this?

QUEST: If you're a lady, probably not.

(RUE DE BERNADO): Even if you are a man.

QUEST: Well I don't know, sorry I've got my -- I'm wearing comfortable shoes. We have a crisis; I have dropped my napkin on the floor.

(RUE DE BERNADO): Terrible (ph).

QUEST: Don't ask. Why do the Chinese want to know these things which most Westerners don't follow anyway? You go to the average dinner party or the

average business dinner and people will be eating with one fork, they will be having elbows on the table.

(RUE DE BERNADO): You've said the words, to the average businessman, to the average occasion. What we want to give them is the key to enter the

average one, but also the highest one and to be able to adapt no matter where you are and who you are.

QUEST: After that all that sitting up right and proper manners one needs to do some slouching. The hotel spa seems an excellent place to slouch and

thanks to a popular Chinese payment app, travelers can use spa trips amongst other things to earn airline miles. The app's called MILESLIFE and

as China's traveling population explodes, the app is growing too. Miles, yes wonderful miles. Don't mind me as I give MILESLIFE a real test run

with the creator Troy Liu. Why have you included spas as one of the first things on the app?

TROY LIU: If you come here for dining, well you probably want to stay here for spa too or if you stay here as a guest, you probably want to go to a

spa to earn more miles too.

QUEST: How many miles have you got?

LIU: I would say it's more than 100 million.

QUEST: What your app has done is very cleverly linked the spending to the miles in an easy way, correct?

LIU: This is the best way to connect the low frequency behavior, where basically flying, it's relatively low frequency for most people, but now

every time you pull up this app to think where to eat and to pay, to earn miles, you actually think about this airline (ph).

QUEST: MILESLIFE can be used to pay for dining, day trips, hotel experiences even e-commerce. This is how it works, travelers find

merchants through the app, maybe it's a restaurant I want to try in Shanghai; I can see right away how many miles are earned per visit, one

mile for one (inaudible). Not only that, if I link say my United Airlines credit card to the MILESLIFE app, I'll also earn miles for the spend on the

card on top of the miles. It's double dipping. Oh I do love double dipping.

What do we have here?

MALE: Hello sir, some kind of a dumpling?

QUEST: (ph) This dumpling's excellent. (ph)

QUEST: Troy says dining (ph) is the most popular app option among Chinese users. So, when in China...

QUEST: (ph) Where did the idea for Mileslife come from?

TROY LIU, FOUNDER & CEO, MILESLIFE: (ph) I was a very, very aggressive miles geek (ph), while I was very young (ph), while I was in college, and I

started to write a blog, back in 2007, for about 10 years, and I then I thought (ph), as a blogger, you know, you have to travel around the world

to find a topic to write (ph), right? Everyplace I go, I use different apps (ph).

QUEST: Troy says he became frustrated by the need use multiple apps for travel, food, and hotel. It was that frustration that inspired Mileslife.

He created a one-stop shop. LIU: We were able to get 14 loyalty for once (ph) on board, around the

globe.

QUEST: What's interesting about this is the quality airlines that you're getting miles from. So, Krisfala(ph), Singapore, RN Air (ph), British

Airways-are you still a mileage geek?

LIU: Yes, always. That's the only thing I do in my life.

QUEST: Right now, the app is limited to seven cities in China and parts of Singapore.

LIU: Well, I'm hoping to expand to worldwide eventually. That's (ph) because miles is the concept-is a universal concept. Isn't that right?

(ph)

QUEST: We started this month's BUSINESS TRAVELER with the view from the Bund in daylight. But this is how you've really got the see Shanghai, in

all its modern-day glory. The shining lights of the city coming alive, perhaps a metaphor for the travel revolution across this country and its

impact around the world.

And that's CNN BUSINESS TRAVELER for this month, I'm Richard Quest, reporting from Shanghai. Wherever your travels may take you, I hope

they're profitable.

END