【Epoch Times News, October 26, 2024】Amid the closure of Russian airspace, major global airlines are reducing flights to and from China, and in some cases even completely withdrawing their services. Experts say that the main reason for this move by airlines is not only due to the increased operational costs of long-haul flights to Asia, but also a reflection of the current economic situation in China.
As Russia’s invasion of Ukraine led to the EU, UK, and other Western countries imposing comprehensive flight bans on Russian aircraft, Russia responded in kind by closing its airspace, resulting in longer flight routes for many European airlines flying to Asia.
The longer the route, the more fuel a flight requires, leading to increased costs. Company websites show that Virgin Atlantic and Scandinavian Airlines have completely withdrawn from China, with even British Airways ceasing its Heathrow-Beijing Daxing flight on the same day. Virgin Atlantic stopped all flights to Hong Kong in 2022, closing its local offices and ending its 30-year business in the Asian financial center.
According to a report from travel news website Skift, seven major airlines have withdrawn from China in the past four months.
Quoting John Grant, Chief Analyst of aviation data provider OAG, CNBC reports that the situation “will become more apparent before it improves.”
However, as major airlines withdraw from China, some airlines are simultaneously increasing capacity in other Asian regions, indicating that the issue of Russian airspace is not the only obstacle for foreign airlines operating flights to China.
Grant pointed out that a decrease in demand to and from China is one of the main issues. Economic problems in China hinder outbound travel, while waning international interest in China suppresses the influx of inbound tourists.
According to data from the Chinese government, in 2019 before the pandemic, China welcomed around 49.1 million foreign tourists; as of July this year, the number of foreign visitors to China was around 17.25 million.
When Qantas announced the cancellation of its Sydney-Shanghai flights in May citing “low demand,” Lufthansa last month considered suspending its Frankfurt-Beijing route.
Grant mentioned that U.S. airlines have not been severely affected by the Russian airspace issue but they are also withdrawing from China.
“Indeed, U.S. airlines are making tough but very commercial decisions to give up services to China and redeploy aircraft elsewhere,” he said. “Frankly, this is understandable and a reflection of the market.”
Grant pointed out that European airlines have found better destinations for aircraft originally bound to and from China. After canceling its Beijing route, British Airways reallocated aircraft to Cape Town, increasing the load factor from 55% on the Beijing route to 90% on the Cape Town route.
He noted that British Airways has continuously reduced the aircraft size for flights to China as another way to cut capacity. The routes once served by Boeing 747 jumbo jets have been replaced by B777s, and eventually, even smaller B787s have taken over.
According to the South China Morning Post, Dennis Lau, Managing Director of consulting services at Asian Sky Group, said, “U.S. and European airlines can more effectively redeploy aircraft in other more lucrative markets, such as transatlantic routes.”
Data analysis from aviation industry-leading platform Cirium Diio by Skift in 2019 showed that Finair operated 42 direct flights from Helsinki to China per week in August. By August 2024, this number had dropped to just three.
Analysts state that the struggling state of the Chinese economy is a concern for airlines.
David Bach, Chairman of the Swiss International Management Development Association, told SCMP, “The flights to and from China by Western airlines largely reflect the demand for business travel, and therefore, the weakness in the Chinese economy and the ongoing slowdown in foreign direct investment (FDI) into China…have not disappeared.”
Bach said, “The demand for business leaders to frequently visit China has indeed declined.”
In August, Trip.com Group’s corporate travel division stated that China’s business travel market grew by 39.2% last year and is expected to reach the 2019 level this year.
However, in the second quarter of this year, the revenue per available room and the average daily rate of six international hotel chains with properties in China showed a year-on-year decline. For example, Wyndham saw a 17% decrease in revenue per available room, while IHG Hotels & Resorts decreased by 7%.
Yan Liang, an economics professor at Willamette University in Oregon, told SCMP, “When business travel decreases, airlines suffer as well.”
“Companies will not return to China quickly,” she said.
Skift reported that Jue Wang, Assistant Professor at Leiden University in the Netherlands and an expert in Chinese economic and political policy, emphasized that aside from Russia closing airspace, tense economic relations between the CCP and the West are key factors influencing recent decisions by airlines.
“Whenever the investment environment is vibrant and friendly, you see visits from China to look for opportunities, and vice versa. But if the environment is not good, you won’t see this kind of travel. Sometimes, people travel for business opportunities but come back with nothing. Even in those cases, you will see more people traveling, but when the environment is tense, people are less willing to take a flight to seek business opportunities.”
Wang stressed that tension is not limited between China and Europe but also the impact of the U.S.-China trade war on economic growth and air travel demand.
“Some companies are considering moving their production bases out of China. Chinese high-tech companies face the risk of U.S. sanctions, and these punitive policies may prompt other countries to decouple from China,” she said. “We haven’t reached the strict U.S. criteria where if you do business with China, you are excluded from the U.S. market— but people are worried that moment may come. They are preparing for it by shifting production out of China or actively looking for alternative opportunities.”
Although flight frequency between the U.S. and China is expected to more than double compared to 2023, it is still only a quarter of the pre-pandemic level.
Analysis from Skift on OAG data predicts that in 2019, there were over 17,000 departure flights between the U.S. and China, while in 2024, there are only 4,228 flights.
Low demand is also troubling China’s domestic airlines.
Grant believes it will take longer for Chinese airlines to recover.
He noted that this winter, Chinese airlines will operate 82% of all flights between China and Europe, up from 56% before the pandemic, despite the current market and trade flows being far weaker than before. This is driven by capital requirements and promotion.
“Chinese airlines urgently need cash and want to be seen as returning to normal.”
“And more flights are coming. This is crazy — there is simply no real demand,” Grant said.