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Aug 20, 2024 05:57 PM

Caixin Weekly | Civil Aviation: Prosperity in Passengers, Not in Profits (AI Translation)

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This article was translated from Chinese using AI. The translation may contain inaccuracies. Click the button on the right to hide or reveal the original version.
上海,一架维珍客机从伦敦飞抵上海浦东国际机场。维珍退出中国,是2024年国际航线“中进外退”的缩影。
上海,一架维珍客机从伦敦飞抵上海浦东国际机场。维珍退出中国,是2024年国际航线“中进外退”的缩影。

文|财新周刊 邹晓桐,赵雪杉(实习)

By Caixin Weekly's Zou Xiaotong, Zhao Xueshan (Intern)

  文|财新周刊 邹晓桐,赵雪杉(实习)

By Caixin Weekly's Zou Xiaotong, Zhao Xueshan (Intern)

  2024年的中国民航“旺丁不旺财”,连最赚钱的暑运旺季,机票也卖不上价。

In 2024, while Chinese civil aviation has seen a surge in passenger numbers, revenue has not followed suit. Even during the most lucrative summer travel season, ticket prices have failed to rise.

  航班管家7月17日的数据显示,2024年暑期国内机票不含税(经济舱)均价787元,同比下降17%,比2019年还低1%;国际机票(经济舱)均价2303元,同比下降25.37%,比2019年暑期跌了12.1%。今年以来,春运后的每个节假日,航空公司间都会进行价格战,“量升价跌”窘境延续至今。在“五一”假期,票价临期跳水、环比跌约两成,打破了“买得越早越便宜”的惯例,不少旅客打电话给航司要求退差价。

According to data from Flight Master on July 17, 2024, the average price of domestic economy class air tickets for the summer holiday period, excluding taxes, is 787 yuan, a year-on-year decrease of 17% and 1% lower than in 2019. International economy class air tickets average 2,303 yuan, a decrease of 25.37% year-on-year and 12.1% lower than the summer holiday of 2019. Since the beginning of this year, every holiday following the Spring Festival has seen airlines engage in price wars, leading to a "volume up, prices down" dilemma that continues today. During the May Day holiday, ticket prices plunged by about 20% compared to the previous period, breaking the convention that "the earlier you buy, the cheaper it is." Many travelers called airlines to request price difference refunds.

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Caixin is acclaimed for its high-quality, investigative journalism. This section offers you a glimpse into Caixin’s flagship Chinese-language magazine, Caixin Weekly, via AI translation. The English translation may contain inaccuracies.
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Caixin Weekly | Civil Aviation: Prosperity in Passengers, Not in Profits (AI Translation)
Explore the story in 30 seconds
  • Chinese civil aviation saw a surge in passenger numbers in 2024, but ticket prices dropped by 17% domestically and 25.37% internationally, leading to reduced revenues.
  • Airlines faced higher operational costs due to oil price hikes, RMB depreciation, and increased competition from high-speed rail, resulting in significant financial losses.
  • Foreign airlines like Virgin Atlantic and Qantas reduced their presence in China, while Chinese airlines expanded international routes, especially to the Middle East, despite an oversupply of wide-body aircraft.
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Explore the story in 3 minutes

In 2024, Chinese civil aviation has seen a significant increase in passenger numbers, but this hasn't translated into higher revenues. During the summer holiday season, the average domestic economy class air ticket price was 787 yuan, down 17% year-on-year, while international ticket prices averaged 2,303 yuan, a 25.37% decrease. This dip follows a trend where airlines have engaged in price wars post-Spring Festival, leading to the "volume up, prices down" issue, even under traditionally high-demand periods like the May Day holiday, when ticket prices fell by about 20% [para. 1].

Data released by the Civil Aviation Administration of China showed that from January to June 2024, the cumulative passenger volume surpassed 350 million, a year-on-year rise of 23.5%, and a 9% increase compared to 2019. Despite this, the average domestic route ticket price was down 5% year-on-year, and international routes saw a 20% drop [para. 2]. According to the China Air Transport Association (CATA), the oversupply in the domestic market and the inadequate recovery of international routes have resulted in low ticket prices and significant financial losses for airlines, with a total loss of 7.2 billion yuan in the second quarter of 2024 and a cumulative loss of 4.71 billion yuan in the first half of the year [para. 3].

Additionally, international routes face a scenario where foreign airlines are retracting. Virgin Atlantic announced the suspension of its Shanghai-London flights, its only Chinese route, due to high operational costs [para. 4]. Such market exits by foreign airlines, like Qantas, which also canceled its only direct flight to China, have allowed Chinese carriers to dominate, especially with a significant upsurge in capacity on international routes [para. 5][para. 6]. As of early 2024, 742 direct international passenger routes were in operation, reflecting a partial recovery to pre-pandemic levels, with regions like Africa showing strong performance while North America lagged [para. 11].

Domestically, the rapid growth and densification of the high-speed rail network have added competitive pressure on civil aviation. With advancements in rail services and increased mileage, the overlap with civil aviation routes has decreased air passenger volumes in several segments. For instance, the average passenger trip distance in domestic air travel increased to 1,518 kilometers in early 2024 due to high competition over shorter routes [para. 6][para. 9].

The civil aviation industry also grapples with high operational costs due to rising aviation fuel prices and increased debt levels from the pandemic. Most notably, the wide-body aircraft utilized during the pre-pandemic period now burden airlines with low utilization rates amid reduced demand on long-haul international routes [para. 6][para. 11].

As competition with high-speed rail intensifies, Chinese airlines have introduced flexible ticket policies to enhance customer satisfaction and boost sales. Despite these measures, the overall financial metrics for the first half of 2024 reveal that major carriers like Air China, China Eastern, and China Southern continued to incur losses [para. 12]. However, smaller airlines that focused on optimizing scale and fleet structure, like Spring Airlines and Juneyao Airlines, showed positive financial results [para. 13].

Regarding the summer travel season, industry forecasts predict increased traffic but continued pressure on ticket prices. Additional demand-driven initiatives include expanded international flights and visa-free entry policies, which have boosted tourism and travel, albeit with noted challenges in visa processes for outbound travel to Europe and the U.S. Yet, the long-term economic trends and trade policies are expected to impact business travel and international flight patterns significantly [para. 16][para. 18].

In summary, while passenger numbers in Chinese civil aviation are rebounding strongly post-pandemic, the industry's financial performance struggles due to oversupply, rising operational costs, and fierce competition from high-speed rail services, leading to sustained losses in major airlines and the necessity for strategic adjustments to adapt to these evolving market dynamics.

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Who’s Who
Virgin Atlantic
Virgin Atlantic announced on July 17, 2024, that it will suspend its Shanghai-London route starting October 26, 2024. This route, their only China service, was resumed in May 2023 after a three-year pandemic halt. The decision is due to increased costs from rerouting around Russia, which adds flight time and operational expenses.
Australian Airlines
Australian Airlines announced its exit from the Chinese market, canceling its only direct flight route between Australia and China starting July 28, 2024. The airline plans to reallocate the released capacity to other regions in Asia.
China Eastern Airlines
China Eastern Airlines (东航) is highlighted for having fully recovered and even exceeded its 2019 international and regional flights capacity to 102% during the 2024 summer transport season. Additionally, Eastern is increasing flights to the Middle East and other non-traditional markets, including new routes to Saudi Arabia and Turkey, aligning with China's strategic initiatives.
British Airways
According to the article, British Airways (BA) will be the only foreign airline operating the China-UK route after Virgin Atlantic's exit on October 26, 2024. BA and China Eastern Airlines (Eastern) currently share the route, which is seeing increased competition and cost pressures, especially due to the need for Russian airspace bypass.
Xiamen Airlines
Xiamen Airlines (XiamenAir) has increased its competitiveness by offering lower ticket prices on international routes. For example, XiamenAir's flights from Doha to Beijing are significantly cheaper than those operated by Qatar Airways, saving passengers 1000-2000 yuan. Additionally, XiamenAir’s international and regional flights have been restored to 102% of their 2019 levels.
Qatar Airways
Qatar Airways is mentioned in the context of increased competition on international routes. For instance, Xiamen Airlines’ tickets for the Doha to Beijing route are cheaper by 1000-2000 yuan compared to Qatar Airways. Additionally, Southern Airlines has opened a new Guangzhou to Doha route, increasing competition for Qatar Airways in that sector.
Air China
Air China (国航) will increase its fleet with 112 aircraft over three years, significantly expanding capacity, but they still face financial challenges. Despite a 50% increase in domestic flight capacity compared to 2019, its overall load factor remains below pre-pandemic levels. Additionally, the decline in ticket prices and rising operational costs continue to pressure profitability, with significant losses reported in the first half of 2024.
China Southern Airlines
China Southern Airlines (Code: 600029.SH) has increased its investments in international routes, especially in the Middle East, and has experienced mixed financial results. The airline pre-announced a loss for the first half of 2024, citing extreme weather conditions as a significant factor. However, among China's "Big Three" airlines, China Southern’s domestic load factor (passenger occupancy rate) has recovered to pre-pandemic levels.
Cathay Pacific Airways
Cathay Pacific Airways (00293.HK) is among the airlines increasing their focus on the Middle East. Recently, it opened flights connecting Hong Kong and Riyadh, the capital of Saudi Arabia. This move is part of a broader industry trend of expanding routes to the Middle East, aligning with China's strategic initiatives and expected to enhance economic ties with the region.
HNA Group
HNA Group has opened a direct flight from Haikou to Abu Dhabi, UAE. The group's subsidiary, Hainan Airlines, is expanding its international routes, including this new route to the Middle East, reflecting a broader trend of Chinese airlines increasing investments in the region.
AI generated, for reference only
What Happened When
July 12, 2024:
Data released by the Civil Aviation Administration of China shows that the cumulative passenger volume in the first half of 2024 exceeded 350 million.
July 17, 2024:
According to data from Flight Master, the average price of domestic economy class air tickets for the summer holiday period is 787 yuan, and international economy class air tickets average 2,303 yuan.
July 17, 2024:
Virgin Atlantic Airlines announced that it will suspend its Shanghai-London flights from October 26, 2024.
July 28, 2024:
Qantas Airways announced its exit from the Chinese market, planning to cancel its only direct flight between Australia and China.
AI generated, for reference only
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