The content examines the different experiences of domestic and foreign airlines following the easing of China’s Covid-era restrictions, highlighting the contrasting strategies and outcomes. The initial divergence is evident in the fact that foreign airlines, forced to avoid Russian airspace due to geopolitical tensions, face higher costs, resulting in reduced competitiveness against Chinese rivals. (para. 1)(para. 2)Conversely, Chinese airlines that are exempt from such airspace restrictions are expanding their international routes, especially to the Middle East. Major state-owned carriers such as Air China, China Southern Airlines and China Eastern Airlines are opening new routes to countries such as Saudi Arabia, Qatar, Turkey and the United Arab Emirates. (para. 3)(para. 4).

Despite expectations of a post-pandemic travel boom, the anticipated “revenge travel boom” was short-lived. Economic weakness has kept business travel numbers low, while domestic travelers are increasingly using high-speed rail, resulting in lower than expected demand absorption for the increased flight capacity. (para. 4)(para. 5)This has prompted many foreign airlines to rethink their China operations. Virgin Atlantic, for example, announced the suspension of its London-Shanghai route from October, citing the Russian airspace ban that affects flights from certain countries due to the ongoing Ukraine conflict. (para. 6)(para. 7).

The changing market dynamics are evidenced by statistics from VariFlight, which show that Chinese airlines operated 76% of China-Europe flights by the end of June, a stark contrast to the 50:50 split before the pandemic. (para. 8)Some European airlines, such as Air France-KLM, have reduced their flight frequency and number of destinations to China, significantly curtailing their operations compared to pre-pandemic levels. This reduction is partly due to the additional costs and complexity of rerouting flights to avoid Russian airspace, which has led to higher operating costs and airfares. (para. 8)(para. 10)(para. 11).

Demand for international travel to and from China remains lower than expected after the pandemic. For example, Australian airline Qantas Airways also suspended its nonstop service to China and shifted its capacity to other Asian markets due to insufficient demand recovery. (para. 12)(para. 13)Domestically, airfares in China were about 15 to 20 percent cheaper from early 2023 to July of the same year than in 2023 as supply exceeded demand, reflecting airlines’ struggle to fill flights despite increased capacity. (para. 14)Chinese airlines’ load factors, a measure of seat occupancy, are expected to rise slightly by the end of the year but will still remain below pre-Covid levels. (para. 14)(para. 15).

Chinese airlines continue to adjust their strategies, including significant price cuts even during periods of traditionally high demand. Average ticket prices during peak season have fallen significantly year-on-year, underscoring the fight against overcapacity, especially on wide-body aircraft typically used for long-haul flights. (para. 16)(para. 17).

New routes to the Middle East underscore strategic changes: Chinese airlines are adding destinations such as Riyadh, Doha and the capitals of the UAE to their flight schedules, in line with the Civil Aviation Administration of China’s goal of increasing the number of international flights to 80% of 2019 levels. (para. 18)(para. 19)However, these efforts are not enough to absorb the excess capacity of wide-body aircraft originally intended for US and European routes, which will lead to continued financial losses for the major state-owned airlines in the first half of 2024. (para. 20)–(para. 24)In comparison, smaller private airlines such as Juneyao Airlines have managed to become profitable over the same period, highlighting the uneven impact within the industry. (para. 24)Given ongoing overcapacity, these challenges are likely to persist as deliveries of new aircraft to airlines continue to be postponed due to the pandemic. (para. 25).

AI generated, for reference purposes only