China’s international reopening: A slow burner, not a game-changer

John Grant, Chief Analyst at OAG, explains how China's air travel is re-opening
John Grant

The news of reopening to all international travel from 8 January 2023 came as a surprise to most forecasters, considering the disruption this market has seen since 2020. In the past three years, China went from being the fifth largest international market in the world with over 102 million seats, to just 7.4 million seats in 2022, making it 51st in global rankings – just ahead of Ethiopia, but behind Cyprus.

China’s shutdown was a significant moment for air travel on a global scale. Prior to the January reopening, the international market from China stood at just 7% of its pre-pandemic levels. Although the locally based airlines were to some extent able to turn their capacity towards domestic services, for most of them, the impact on financial results was still crippling. Chinese airlines unsurprisingly reported disheartening figures at the end of 2022, with Air China and China Southern showing year-to-date losses of $4.6bn and $2.4bn, respectively. For China-based carriers, then, the removal of quarantine requirements was welcome news.

The sale of flights to and from China has been largely suspended since 2020, partly due to operational difficulties: limitations on capacity, damages to operating performance, expensive penalties of presenting Covid-positive passengers and/or staff are just some of the issues global airlines have faced. This put most airlines operating flights to and from China into maintaining a “holding position”, essentially operating with minimal capacity in the market until its eventual return. For example, in 2022, Hong Kong airlines had less than 10% of its 2019 China frequency, and Singapore Airlines reduced the number of flights to China from up to 30 to just one a day.

Rebuilding capacity to and from China will be a slow process that will require careful consideration, especially for American and European carriers, which have largely re-oriented their aircraft to other international or Asian destinations and now face the logistical hurdle of finding capacity. Several airlines, such as British Airways and Air France, have announced plans to relaunch China services in the summer, but this will not be without difficulty both from a logistical and a financial perspective. Finnair, amongst others, had previously spent many years focusing on developing a stronger China market presence, but has now built a completely new network based on United States destinations and much less exposure to China and the broader Asia market. With many airlines having pre-sold many of their summer 2023 flights, switching capacity to China might pose a problem.

European carriers find themselves in an even more difficult position given the current geopolitical situation. For airlines based in Asia and North America, accessing China is a logistical challenge, with typical scheduling patterns now impractical. With Russian airspace closed, alternate routings from Europe to Asia require either a Southerly track crossing Central Asia, or a Northerly routing which sees aircraft reach almost as high as the North Pole before heading back down. In either case, the rerouting adds around one to two hours of flight time, taking the total beyond the twelve-hour mark – the point at which carriers grapple with complex aircraft integration issues that bring about either a delay to the returning flight, inefficient crew and aircraft utilisation, or a range of missed connecting opportunities.

To take the example of Lufthansa, which operated 2100 flights to China in 2019, adding an extra two hours of flight time equals about 175 days of extra aircraft flying time just in one direction. No airline has such spare capacity in its fleet, meaning that even after this international reopening, airlines will likely have to continue to operate with less frequency than in 2019 – and for some, returning to this market might not be worth the lost opportunities elsewhere on a global scale.

Overall, though the removal of restrictions is significant news for global aviation, it will only bring about slow change in the immediate term. We will likely have to wait quite a while for China to regain its former position as a major international market.

Written by
John Grant
Chief Analyst at OAG
February 7, 2023