As rising costs and low demand continue to impact the aviation industry, major global airlines are scaling back or halting services to China, citing economic and geopolitical challenges.
Major airlines are scaling back flights to China due to increased operational costs and reduced demand. Following the Russian airspace closure, which remains in effect due to geopolitical tensions, many European carriers are forced to take detours around Russia, substantially increasing their route lengths. These longer flight paths require more fuel and larger crews, making flights to Asia financially challenging. In contrast, Chinese airlines maintain a competitive advantage since they continue to fly over Russia, enabling shorter, more efficient routes and giving them an operational edge over European counterparts.
In recent years, notable airlines like Virgin Atlantic and Scandinavian Airlines have withdrawn from China entirely, with others significantly cutting their flight frequencies. Virgin Atlantic, for instance, ceased all flights to Hong Kong in 2022, closing its office there after a 30-year presence. This shift reflects a broader trend across the industry, with carriers redeploying aircraft to more profitable regions, as Chinese routes become increasingly difficult to sustain.
Rising Operational Costs and Extended Routes
Since the EU and the UK banned Russian aircraft from their airspaces following the Ukraine conflict, Russia retaliated by closing its airspace to European carriers. This restriction has caused European airlines to fly longer routes to Asia, resulting in a range of cost burdens. For example, these extended flight paths necessitate additional fuel, while staffing expenses rise as crew numbers increase from two to three or four to comply with the longer travel times.
Chinese airlines, however, are unaffected by these restrictions, allowing them to operate shorter, more direct routes to Europe and Asia. This advantage translates to lower operational costs, which enables Chinese carriers to offer competitive pricing that European airlines struggle to match. As European airlines cope with increased operational complexity, Chinese carriers are capitalizing on their capacity to run more efficient routes, bolstering their market share.
Strategic Realignments to High-Demand Regions
As demand for travel to and from China remains low, global airlines are reallocating their resources to more lucrative destinations. For instance, British Airways, which halted its Beijing route, redirected its aircraft to Cape Town, where passenger load factors increased from 55% on the Beijing route to over 90% in Cape Town. This strategic redeployment underscores a wider trend among carriers who are choosing to concentrate resources where demand is robust, ensuring higher returns on investment.
China’s economic challenges further contribute to reduced demand for outbound travel. While international travelers to China reached only 17.25 million by mid-2023, this is a marked decrease from the 49.1 million visitors in 2019. Australian carrier Qantas, for instance, cited “low demand” when it suspended its Sydney-Shanghai route in May 2023. Similarly, U.S. airlines are scaling back their China-bound services, preferring to maintain minimal presence in the market until demand stabilizes.
Chinese Airlines Surge Despite Market Difficulties
Despite lower demand, Chinese airlines have ramped up their operations, now handling 82% of flights between China and Europe, up from 56% pre-pandemic. While this increase solidifies their market position, it comes at a cost. China’s largest airline reported a $4.8 billion loss in 2022, which it managed to reduce to $420 million in 2023. Unlike global carriers that have seen a return to profitability, Chinese airlines continue to face financial challenges.
This winter, Chinese airlines will operate 18 new routes between China and Europe. Aviation analyst John Grant describes this expansion as “irrational given the current demand levels” but suggests it highlights the airlines’ drive for cash flow in a challenging economic environment.
Future Prospects for China’s Aviation Market
The future of China’s aviation market remains uncertain, as carriers worldwide reassess their strategies amid rising costs and sluggish demand. While European airlines find more lucrative markets elsewhere, Chinese airlines face limited competition in the China-Europe corridor. Yet, without a significant recovery in demand, profitability remains a challenge even for those that retain a presence in this route.
As geopolitical factors, economic realities, and operational costs shape the aviation landscape, carriers may need to adopt new strategies to navigate the prolonged downturn in the Chinese market.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.