China’s domestic air traffic suffering due to harsh ZERO-COVID-19 policy

China’s domestic air traffic is caught between the devil and the deep sea. While it was once the world’s envy after China staged a super fast recovery from the Wuhan coronavirus, air traffic footfalls are now faltering with Chinese authorities trying to implement a draconian zero-COVID policy leading to a drop in consumer confidence following repeated outbreaks of COVID-19 in China.

Tight travel rules by China’s PLA is chocking the growth in the sector.

The outlook for the fourth quarter, which is typically a popular time for southerners to head north for winter breaks and northerners to head south for warmer weather, is dim because of these officials.

Chinese airlines face further disruption since international traffic is negligible.

“It’s very exhausting that the virus somehow always manages to make a comeback,” said Elaine Shen, a Shanghai resident who had to put off her domestic travel plans for the first time since the start of the pandemic due to cases in Shanghai.

While domestic capacity at three of China’s biggest airlines touched around 115% in April, by October it fell almost vertically to around 77% due to outbreaks, as per HSBC data.

This is in contrast to steadier U.S. domestic recovery.

In mid-November, the situation for China’s domestic airlines worsened after authorities created a rule that bars travellers from any city that had reported even a single COVID case within the last 14 days.

Beijing is intent on going ahead with the Winter Olympics next year which is seeing a diplomatic boycott by many countries citing Nazi-style concentration camps in Xinjiang.

Hangzhou, the capital of Zhejiang province, has slashed the number of flights to Beijing to just one per day due to two local cases.

In the third quarter, China Eastern Airlines, Air China,  and China Southern Airlines posted a combined loss of around $1.25 billion (8 billion yuan).

According to analysts from HSBC, there is potential downside risk to combined fourth-quarter estimates that have a current consensus loss of 7.2 billion.

According to aviation data provider Variflight, China’s domestic air passenger traffic stood at around 40% of pre-COVID levels in November; it equates to a 60% drop in flights with 2019 levels.

Fears of the Omicron variant are also fueling decrease in demand, said airline data provider Cirium.

The fall in traffic comes as Chinese airlines ready for the return of the Boeing 737 MAX around year-end after it last week received safety approvals from China’s aviation regulator.

According to Chen Jianguo, an expert at Aircraft Owners and Pilots Association of China, the extra capacity is likely to prove a burden.

“Because of COVID, most airlines in China are not short of capacity,” he said. “Rather, they’re running a serious surplus of aircraft at the moment… So (for the MAX), airlines have no option but to suffer in silence.”

($1 = 6.3772 Chinese yuan renminbi)



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