European airlines are suspending flights to China. Is this the ‘new normal’?

Having occupied various executive positions within the airline industry in Europe, Rodrigue is now currently based in Vietnam where he officiates as regional sales manager for Asia Pacific at BAA Training Vietnam. When he is not flying in Asia, Rodrigue is leveraging his extensive aviation knowledge and experiences through articles for AeroTime.  

While intercontinental flights between Europe and Asia are thriving, catching up to, if not surpassing, pre-COVID levels, European airlines’ flight frequencies to Greater China are being quietly, yet consistently reduced. This is yet another instance where geopolitics is the main driver behind a structural shift in the industry. 

Since the beginning of the Russian invasion of Ukraine on February 22, 2022, and the subsequent closure of Russian airspace to European airlines following European Union (EU) sanctions imposed on Russia, flights between Europe and Asia have transformed into another area of trade and economic tensions between the EU and the People’s Republic of China.  

European carriers have to reroute their flights to avoid Russian and Belarusian airspace, as well as most of Ukraine’s, but Chinese airlines do not. Indeed, Russian airspace remains open to Chinese carriers, a perk of the “no limits” partnership between the two nations. This puts Chinese carriers at a big competitive advantage against their European (and, to a lesser extent, American) rivals, thanks to the reduced flight time and corresponding fuel savings. As an example, this equates to a more than three-hour difference between China Southern Airlines’ flight CZ673 (nine hours and 58 minutes) and British Airways’ BA88 (13 hours and three minutes) on a flight from Guangzhou to London.  

With fuel typically accounting for roughly 25% of the cost of any given flight, European carriers’ margins on flights to China are currently under heavy stress. This adds to the existing subsidies Chinese airlines receive, either through local governments or through public ownership, to open intercontinental flights to Europe, driving tickets prices further down and bringing additional pressure on already weak yields. As a result, the share of Chinese airlines’ flights to Europe is expected to rise this winter from 56% in 2019 to 82%. Furthermore, around 18 new routes from China to Europe will be opened, all by Chinese carriers, often from second or third-tier cities and therefore heavily subsidized.  

But can this all be attributed to the Russian invasion of Ukraine? While being a key contributor to this paradigm shift, the invasion is far from being the only explanation. Actually, the foundations were laid for a structural reduction in demand between the “West” and China. Ever since the elections of Xi Jinping in 2012 and Donald Trump in 2016, and the subsequent trade war between the US and China, relations between the two blocks have become increasingly strained. 

Furthermore, the 2020 COVID pandemic has been a wake-up call in Europe regarding its economic dependency on China, but also regarding the ever-increasing lack of a level playing field in its competition with China, leading to a gradual “de-risking” strategy in the EU to diversify and rebalance its supply-chain partners in Asia.  

All those factors combined has led to diminishing demand in Europe and beyond for travel to China. A good counter example is the fact that Qantas, Australia’s flag carrier, stopped its Syndey to Shanghai route during the summer of 2024, despite being unaffected by Russian airspace’s closure. This is due to low demand all the while having the most intertwined ties of any western nation with China.  

Overall, while around 50 million visitors travelled to China in 2019 globally, there have only been 17 million so far this year. And with China’s economy facing its biggest slowdown in 45 years, demand for outbound travel is plummeting as a result. Yet, Chinese airlines are eager to capitalize on their new competitive advantage and secure quick cashflow, through the abovementioned launch of new routes and capacity dumping, to the detriment of yields, margin and overall profitability. Indeed, while foreign carriers enjoy industry-high levels of profitability, driven by high fares and demand worldwide, this is not the case in China. China Southern Airlines alone lost a total of around US$5 billion in 2022, reduced to a loss of US$420 million last year.  

Finally, with demand outside of China being very high, and because of the abovementioned reasons, European carriers are incentivized to redeploy capacity on markets with better yields prospects.  

The consequence of these dynamics is, predictably, the slow but consistent withdrawal of European carriers from the Chinese market for competitive reasons.  

Below is a non-comprehensive list of the carriers pulling out or having pulled out of Chinese market altogether. 

Carriers Information British Airways London-Beijing suspended, London-Hong Kong flights cut by 50% Finnair Chinese flights cuts from 42 flights/week to 3 + 1 to Hong Kong LOT Polish Airlines Warsaw-Beijing suspended Lufthansa Frankfurt-Beijing suspended Qantas Sydney-Shanghai suspended SAS Scandinavian  Copenhagen-Shanghai suspended Virgin Atlantic London-Shanghai suspended It must be noted that Air France is also lobbying the French government to have the Chinese carriers taxed in some way to create a more level playing field, without success thus far.  

With the war in Ukraine and China’s economic slowdown showing no signs of abating, could this situation be the “new normal” for flights to China going forward?  

China’s political stance towards Russia should determine, to some degree, if its aviation market enters a long period of international closure or not. The country’s contested neutrality towards, if not outright siding with Russia, leads to the assumption that this “new normal” could indeed become the norm for the years to come. One way for European airlines to address the situation is to capitalize on their partnerships with Chinese carriers. For example, while having exited the Frankfurt to Beijing market, Lufthansa now relies on its joint venture with Air China to address its customers’ needs. 

Conversely, emerging markets in Asia such as India, Vietnam, Thailand, or Indonesia are in high demand, allowing European airlines to redeploy their Chinese market capacities and to grow in the region. 

Finally, mature markets, such as Japan, Singapore, South Korea, or Taiwan are also experiencing a post-COVID rebound in demand, offering further opportunities for European airlines to rebalance their network while mitigating risks on the Chinese market.   The post European airlines are suspending flights to China. Is this the ‘new normal’? appeared first on AeroTime.

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