Shandong Success: Xinxing 737-300s

During the early to mid-1990s China's first nominally independent (though not private) airlines began to come into existence. The equipment of choice for the majority of these airlines was Boeing's 737-300, rather than McDonnell Douglas' anointed Chinese trunkliner version of the MD-80. Shandong Airlines was one of these small airlines and has weaved its way through associations with the big three to survive and become one of China's largest airlines.

Shandong Airlines Boeing 737-300 B-2968 Aeroclassics 1:400 Scale Model Airliner

Shandong Airlines is based in Jinan - capital of Shandong province in North-east China just south of the Beijing/Tianjin mega conurbation. It is China's 2nd most populous province, with a 2010 population of over 95 million people (that's roughly the same size as the Philippines) and about 7% of China's population. Its own airline was established in March 1994.

The complete early fleet - 3 737-300s and 4 Saabs

As with most airlines in China its initial funding came from sources associated with the provincial government; in this case Shandong Economy Development Investment Corporation, Shandong Provincial Project Committee, Jinan, Qingdao, Yantai and Jining Investment Corporations, Shengli Oil Corporation, Qilu Petro-chemical Corporation, Jinan Steel Group, Laiwu Steel General Factory, Yanzhou Mining Bureau and Jinan high-tech Industry development Zone state-capital operation Co.Ltd.

Shandong's 737-300 fleet

The airline's initial equipment was a trio of new Boeing 737-35Ns delivered direct from Boeing as part of a May 1995 order made by China Aircraft Supplies (CASC), who handled all the orders for Chinese airliners during the 1990s. The first pair of 737s arrived in March 1996 and were joined by the third in October. Shandong also appears to have been provided with the routes operated by China Southern's 8 Saab-340s or at the very least it got the aircraft, which arrived in two batches in July 1997 and December 1998.

In  September 1997, less than a year after its formation,  Shandong joined with 5 other of the small independents to create the New Star "Xinxing" Air Alliance. The other airlines included several that would later become majors (Hainan Airlines, Shenzhen Airlines and Sichuan Airlines) as well as two that would be swallowed up by the big three (Wuhan Airlines and Zhongyuan Airlines).

All but Sichuan (using 3 A320s) based their fleets around the Boeing 737-300, for a total of only 57 aircraft. Hainan was the largest but still only operated 15 aircraft, nine of which were 737-300/400s. Shandong with its 3 737s was no larger than Wuhan Airlines or Zhongyuan. This new alliance was an attempt to bolster the independents against the big three, and try and realise some profitability in an environment where only 6 of China's 35 airlines were in the black.

CRJ-200 B-3006 at Dalian in 2010

The CAAC was beginning to see rationalisation, rather than proliferation, as key to profitability and gradually coerced the airlines into mergers, which effectively rendered the Xinxing alliance stillborn. Shandong Airlines however survived and appears to have been one of the better run airlines. In fact in October 2002 it was one of 3 airlines that combined to takeover Sichuan Airlines. Shandong took a 10% stake, whilst Shanghai Airlines also took 10% and China Southern took a 39% stake. Sichuan Airlines kept 40% of the new company, which its assets were transferred to. To this day it continues to have an odd mixture of shareholders.

CRJ-200 B-3007 at Qingdao in 2013

Despite this success and listing on the Shenzhen sharemarket in 2000 Shandong itself felt the need for partners. It had expanded into further regional operations  using 9 Bombardier CRJ-200s and 2 CRJ-700s, however these had proven loss making and by late 2003 it was looking for a strategic partner. That partner turned out to be Air China, which in March 2004 took a large minority stake in the airline by paying 500 million yuan ($60 million) to acquire 22.8%. By this time Shandong's fleet had grown to include 12 737-300s with four added on lease from GECAS and 3 from Boullion Aviation Services since 2000.

CRJ-700 B-3080 at Qingdao in 2013

At this point Shandong Airlines was operating hubs at both Jinan and Qingdao and serving destinations including  Beijing, Shanghai, Guangzhou, Shenzhen, Kunming, Zhenjing, Beihai, Haikou, Huangshang, Xi’an, Wulumuqi, Changsha, Nanjing, Zhuhai, Hongzhou and Xiamen. Following the Air China purchase the Saab 340s were quickly sold and the CRJ fleet also reduced. The 737-300 fleet meanwhile expanded to 16 aircraft with the first 737NGs arriving in June 2005.

The future for Shandong - one of its many 737-800s (Panda Models)

Air China has subsequently wholly taken over the airline, but it has survived and grown to the point where it is now one of China's largest airlines with a fleet of 100 aircraft. Hub operations are run from Jinan, Beijing, Qingdao and Yantai to over 60 destinations. The Boeing 737-300, which served the airline so well has now been fully replaced by 737-800s and a few 737-700s. B-2968 was the last 737-300 to leave the fleet on August 20, 2014. The owned aircraft, aside from B-2995 damaged in a fire, have been converted to ferighters and now serve with China Postal Airlines.

The handover ceremony of Shandong's last 737-300 B-2968 to China Postal

References

Shandong Airlines. Airfleets.com
Shandong Airlines history.
1995, May. China's aircraft-buying ban crumbles in face of demand. Flight Global
1997, Sept. Chinese independents co-operate to form defensive alliance. Flight Global
2002, Oct. Chinese grouping takes over Sichuan. Flight Global
2003, Oct. Shandong courted by Air China as it seeks funding. Flight Global
2004, Mar. Air China takes stake in Shandong. Flight Global