The aviation industry in China may have the worst behind it
the world’s airlines goes from bad to worse. In April the International Air Transport Association, their trade body, forecast the industry’s global revenues would fall by $314bn in 2020, down by 55% from last year, owing to pandemic-related travel disruptions. Carriers are laying off thousands of workers.
The pandemic curve began to flatten in China weeks before the rest of the world entered lockdown. As curbs on internal travel ease and offices reopen, domestic flights are regaining lost ground . In the first week of May, a holiday in China, capacity was scheduled to be only 10% lower than in the same period a year ago, estimates theCentre for Aviation, a consultancy. In America, meanwhile, it was 73% lower.
To be sure, Chinese carriers have taken a big hit. Revenues at the big three plunged by 46% in the first quarter, year on year, to 54bn yuan . They suffered a combined net loss of 14bn yuan. Their share prices remain 25% or so below the level in January, when covid-19 began to spread fast in the city of Wuhan. But that is positively perky next to rivals elsewhere. The Bloomberg world airlines index, which tracks two dozen global airlines, has fallen by half in the same period.
Kelvin Lau of Daiwa Capital Markets, a broker, reckons that travel bans and lockdowns will cut the big three’s revenues by less than a third this year, to 286bn yuan. None has resorted to mass lay-offs. The trio serve the world’s second-biggest domestic market after America and, being state-controlled, can tap government support with fewer strings attached than American firms .
How quickly Chinese air travel returns to pre-pandemic health remains up in the air. A second wave of infections could ground them again. But one thing seems assured: the big three, which accounted for 41% of domestic capacity in 2019, down from 59% in 2010, according to Cirium, a data provider, will reassert their dominance. As firms rush to boost capacity to protect market share, load factors may stay depressed, putting pressure on weaker ones such as Hainan Airlines, China’s fourth-biggest .
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