(CNN) — When China finally reopened its borders after years of Covid restrictions, Western airlines seemed to be…
(CNN) — As China finally reopened its borders after years of Covid restrictions, Western airlines seemed poised to return to a once-bustling market.
Last year, foreign airlines rushed to restore direct routes to the world’s second-largest economy, once known for exporting spendthrift tourists. Some even touted plans to increase flight schedules.
But a year later, the mood seems surprisingly different.
Several Western airlines are cutting back on flights they resumed just a year ago, with aviation industry analysts citing tepid demand due to a slowing Chinese economy.
Higher operating costs and extended flight times brought on by Moscow’s war with Ukraine (as Western airlines avoid Russian airspace) have also squeezed their margins and made them less competitive than Chinese rivals, which have benefited from a long-standing preference among domestic travelers for Chinese-speaking crews.
Adding insult to injury, tense geopolitics has dashed hopes of a full resumption of flights between China and the United States and some of Washington’s close allies, as Western tourists prefer to look elsewhere.
“Foreign airlines did not regain international capacity to China as quickly as Chinese airlines regained international capacity from China,” said Steve Saxon, a McKinsey partner who leads the travel, logistics and infrastructure consulting firm’s China research team.
“Even before reaching pre-Covid levels, foreign airlines are now reducing their flight capacity because they have more profitable opportunities elsewhere in their networks,” he added.
Delta Air Lines (DEL) is among those airlines. The carrier confirmed to CNN that it has postponed plans to resume its Los Angeles-Shanghai route due to “slower recovery in travel demand in the market.”
British Airways will suspend its service from London to Beijing, the Chinese capital, from October 26 until at least November 2025.
It’s the same day Virgin Atlantic scheduled its final flight from Shanghai to London. A spokesperson for the airline told CNN it was a “difficult decision” to discontinue the route that was launched 25 years ago. European airlines have so far been hardest hit by the impact of Russia’s invasion of Ukraine, Saxon said.
Impact of the Russian invasion
Chinese leader Xi Jinping declared a “boundless” partnership with Russia weeks before the full-scale invasion in February 2022 and set out a policy of denouncing sanctions and continuing to strengthen ties with Russian President Vladimir Putin. Since the invasion, Chinese airlines have benefited from shorter routes north to Europe and North America through vast Russian airspace.
In contrast, airlines from other countries have been banned from Russian airspace or have decided to fly over it for security reasons.
Saxon said the detour, which sometimes also bypasses Ukrainian airspace, can add up to three hours to flight times between Asian and European cities, with a considerable increase in cost.
“A flight on a European airline can cost an additional $8,000 to $10,000 in fuel for a two-hour increase in flight time,” he said, noting higher costs for crew and additional aircraft to maintain service.
That appears to be the reason Virgin Atlantic is pulling out. “Operations have become increasingly costly due to increased flight times as we are unable to fly over Russia,” it said in its statement to CNN earlier this month.
The airline said it took two extra hours to fly from Shanghai to London, and an extra hour on the return trip.
This puts foreign airlines at a disadvantage. If given the choice between a 10-hour flight and a 12-hour flight, it’s clear which most travellers would choose, Saxon said.
“People don’t like spending time on airplanes,” he added.
Geopolitics at stake
Most flights bound for China from North America do not fly over Russia, and the diversion is relatively minor for U.S. airlines affected by airspace restrictions, according to Saxon.
However, flights between the United States and China have been subject to carefully negotiated bilateral agreements.
In late March, the U.S. Department of Transportation raised the quota of weekly round-trip flights that Chinese airlines can make to and from the United States to 50, up from 35 earlier this year.
But that is still a fraction of the more than 150 weekly round trips allowed on each side before restrictions were imposed in early 2020 due to the coronavirus.
The two countries have been clashing over a range of issues, from high-end semiconductors to disputes in the South China Sea.
Shukor Yusof, founder of Endau Analytics, which tracks the aviation industry, said relations between the world’s two largest economies are “a critical part of the aviation industry” that cannot be ignored.
“We are entering a very difficult phase with China and the Western world and there will definitely be implications that cannot be underestimated because the airline industry is a global industry,” he said.
While airlines would like to think they can develop strategies based solely on the business environment, Yusof said the reality is that the industry is also “driven by governments that have their own interests, especially for China.”
He also said Beijing has not done enough to actively attract foreign tourists while encouraging Chinese citizens to fly with domestic airlines.
As U.S. airlines delay plans to resume flights to China, flag 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 flight frequencies to the United States.
According to aviation analytics firm Cirium, Chinese airlines have reached the maximum of 50 flights allowed in and out of the United States per week, while the three U.S. carriers that operate services to China (Delta, American Airlines and United Airlines) are operating only 35 flights.
