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Hong Kong
CNN
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When China finally reopened its borders after years of Covid restrictions, Western airlines seemed ready to return to the once-thriving market.
Over the past year, foreign airlines have been scrambling to resume direct flights to the world’s second-largest economy, previously known for exporting lavish tourists, with some even announcing plans to expand their flight schedules.
But a year later, the mood looks very different.
Several Western airlines are currently cancelling flights that were only resumed a year ago. Industry analysts say this is due to low demand due to the weakening Chinese economy.
Higher operating costs and longer flight times due to Moscow’s war on Ukraine – as Western airlines avoid Russian airspace – have also squeezed their margins and made them less competitive than their Chinese rivals, who have benefited from domestic travelers’ long-standing preference for Chinese-speaking crews.
Adding to these problems, the tense geopolitical situation has dashed hopes for a full resumption of air travel between China and the United States and some of Washington’s close allies, as Western tourists largely look elsewhere.
“Foreign airlines have not been able to restore their international capacity to China as quickly as Chinese airlines have been able to restore their international capacity out of China,” said Steve Saxon, a partner at McKinsey who leads the travel, logistics and infrastructure consulting firm’s China research team.
“Even before pre-Covid levels are reached, foreign airlines are reducing their flight capacity because they have more lucrative opportunities elsewhere in their networks,” he added.
Delta Air Lines (DEL) is one of those airlines. The airline confirmed to CNN that it has postponed plans to resume its Los Angeles-Shanghai route due to the “slower recovery of travel demand in the market.”
British Airways will suspend its London service to the Chinese capital Beijing from October 26 until at least November 2025.
It is the same day that Virgin Atlantic has scheduled its last flight from Shanghai to London. A spokesperson for the airline told CNN it was a “difficult decision” to close the route, which opened 25 years ago. European airlines have been hit hardest so far due to the impact of Russia’s invasion of Ukraine, Saxon said.
Chinese leader Xi Jinping announced a “borderless” partnership with Russia just weeks before the large-scale invasion in February 2022 and implemented a policy of rejecting sanctions and further strengthening relations with Russian President Vladimir Putin. Since the invasion, Chinese airlines have benefited from shorter northern routes to Europe and North America via vast Russian airspace.
In contrast, airlines from other countries have been denied access to Russian airspace or have been forced to avoid it for security reasons.
Saxon said the diversion, which sometimes involves bypassing Ukrainian airspace, could add up to three hours to flight time between Asian and European cities, adding significant costs.
“On a flight with a European airline, the fuel cost for an additional two hours of flight time can be between $8,000 and $10,000,” he said, also pointing to higher costs for staff and additional aircraft to maintain service.
This appears to be the reason for Virgin Atlantic’s withdrawal. “Operations have become increasingly costly due to longer flight times as we are unable to fly over Russia,” it said in a statement to CNN broadcast earlier this month.
The airline said the flight from Shanghai to London would take two hours longer, and another hour for the return flight.
This puts foreign airlines at a disadvantage. If given the choice between a 10-hour flight and a 12-hour flight, it would be clear which the majority of travelers would choose, Saxon said.
“People don’t like spending time on board an airplane,” he added.
Most flights from North America to China do not go through Russia, and for U.S. airlines affected by airspace restrictions, the detour is relatively small, Saxon said.
However, carefully negotiated bilateral agreements apply to flights between the USA and China.
At the end of March, the US Department of Transportation increased the quota of weekly round-trip flights by Chinese airlines to and from the USA from 35 at the beginning of the year to 50.
However, this is still a fraction of the more than 150 weekly round trips that both sides allowed before coronavirus restrictions were imposed in early 2020.
There are a number of conflicts between the two countries, ranging from high-quality semiconductors to disputes in the South China Sea.
Shukor Yusof, founder of aviation analyst Endau Analytics, said the relationship between the world’s two largest economies was “a crucial part of the aviation industry” that could not be ignored.
“We are entering a very difficult period with China and the Western world and this will definitely have an impact that cannot be overstated because the aviation industry is a global industry,” he said.
While airlines would like to believe they can develop their strategies based solely on the business environment, Yusof says the reality is that the industry is also “driven by governments pursuing their own interests, particularly with regard to China.”
He also said Beijing had not done enough to actively lure back foreign tourists while encouraging Chinese citizens to fly on domestic airlines.
As U.S. airlines postpone plans to resume flights to China, national carrier Air China added two more flights from the Chinese capital to New York and one to Los Angeles in March. Other Chinese airlines have also increased their frequencies for flights to the U.S.
According to aviation analytics firm Cirium, Chinese airlines have maxed out the permitted 50 flights to and from the United States per week, while the three U.S. airlines that offer service to China – Delta, American Airlines and United Airlines – operate just 35 flights.
