Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Cheap seats give Chinese airlines a much-needed passenger bounce

Stock MarketsSep 07, 2020 03:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. China Eastern Airlines aircraft is seen at the Beijing Capital International Airport

By Stella Qiu and Jamie Freed

BEIJING/SYDNEY (Reuters) - Looking to travel from Beijing to Hangzhou in eastern China? A flight can be had for as low as 180 yuan ($26) - one of a slew of deals fuelling a robust recovery in Chinese passenger levels and which could provide a model for a beleaguered industry globally.

Led by China Eastern Airlines (NYSE:CEA) Corp's (SS:600115) June offer of unlimited weekend flights until Dec. 31 for 3,322 yuan ($485), domestic carriers have fallen over themselves to woo passengers back with bargain-basement fares. At the same time, China's success in mitigating the spread of the coronavirus has helped consumers regain the confidence to travel.

Although the airlines are still loss-making and analysts say the recovery for China's aviation market is fragile and subject to setbacks, the cheap airfare strategy is far more cost-effective than having planes grounded. It also provides a model for other countries to borrow from or even top.

"We may have reached the point where some airlines begin to pay for some people to travel, offering free seats and then seeking to generate ancillary revenues that support the service whilst at the same time rebuilding traveller confidence," John Grant, OAG chief analyst said on his firm's website.

Vietnamese budget carrier VietJet Aviation JSC (HM:VJC) has come close to doing that, offering fares for next year's Lunar New Year holiday from 2,021 dong (9 U.S. cents) on all flights from north and central Vietnam to the country's south.

In the United States too, radical moves are being made.

The country's major airlines last week indefinitely scrapped booking change and cancellation fees. While undermining the pricing model for business travellers who pay a premium for flexibility in ticket changes, the move aims to rekindle domestic demand that in July was 73% below 2019 levels.

In the United States and Europe where COVID-19 case numbers are much higher, airlines are still slashing their forward schedules and business travel remains at anaemic levels, according to data from OAG.


In contrast, Chinese capacity has snapped back to more than 90% of pre-pandemic levels due in part to a summer travel boom, OAG says. It is expected to recover to last year's levels by the end of 2020, according to industry forecasts.

China Southern Airlines (SS:600029), the carrier with the biggest domestic market share, even returned to year-on-year capacity growth in August. (Graphic: Chinese airline capacity,

Analysts stress, however, any pricing strategy will only work if consumers have enough confidence to fly, noting that New Zealand and Vietnam - both coronavirus mitigation success stories - had had strong domestic airline activity, only to see capacity levels drop after new outbreaks.

"For airlines and the travel industry outside China looking on with envy, there are some building blocks that could be emulated to drive some success in recovery amidst the pandemic. But it starts with effectively containing and suppressing the virus," Derek Sadubin, managing director at CAPA Centre for Aviation, said at his firm's Australia Pacific conference last week.

Even if planes are becoming fuller, Chinese airlines are still a long way from profitable, with the country's top three carriers logging a combined loss of around $1.8 billion in the April-June quarter.

Morningstar analyst Ivan Su expects domestic passenger yields for Air China (SS:601111) to slide 20% this year while yields for China Southern are forecast to drop 19% and China Eastern's are likely to fall 15%.

Strict limits on international flights have also led Chinese airlines to start deploying grounded widebody jets on domestic routes to stem their cash burn, raising the risk that a jump in capacity could place further pressure on fares.

Cheap seats give Chinese airlines a much-needed passenger bounce

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email