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Chinese carriers restart their engines

05/11/2020| 5:53:05 PM| 中文

If they recover at home, they could threaten the world’s sickly legacy carriers on international routes.

News for 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. In a vote of no-confidence on their future, on May 2nd Warren Buffett said Berkshire Hathaway, the venerated investor’s conglomerate, had dumped all the shares it owned in American airline firms. Skies in one part of the world, though, look a bit less bleak. The aviation industry in China, where covid-19 was first detected, may have the worst behind it.

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 (see chart). 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 the CAPA Centre for Aviation, a consultancy. In America, meanwhile, it was 73% lower. As Western rivals slash flights, China Eastern this month claimed the title of the world’s biggest airline by current seat capacity, according to OAG, an aviation-data firm.

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 RMB 54bn (USD 7.7bn). They suffered a combined net loss of RMB 14bn. 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.

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. 

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TAGS: Air China | China Southern | China Eastern
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