ANALYSIS: China, Hong Kong and Taiwan Outlook: First In, First Out

China Eastern Airlines Boeing 737-800
China Eastern Airlines Boeing 737-800.
Credit: Rob Finlayson

The Chinese aviation market has rebounded quickly following the year’s first-quarter lockdown. Even as cities remained shut to non-essential travel, Chinese airlines, both state-owned and private, continued some connections as part of social responsibility, ferrying medical supplies and personnel. 

Coming out from the lockdown, the three major state carriers, Air China, China Eastern Airlines and China Southern Airlines, suffered combined losses of CNY26.1 billion ($3.8 billion) for the 2020 first half after consecutive years of double-digit profit gains. Interestingly, it was regional feeder airline China Express that was the sole carrier to post a net profit of CNY8.2 million ($1.5 million) for the first six months of 2020, albeit as a 94.2% year-on-year decline.

However, by August, domestic service across mainland China was almost back to normal, boosted by all-you-can-fly travel passes first introduced by China Eastern. 

By October, China’s overall economy had recouped the losses it made over the first half of the year, avoiding a recession. It was initially expected that there would be a strong rebound of traffic during the October Golden Week holidays because of pent-up demand as international travel turned inward to domestic. Average domestic sorties did grow by 13% year-on-year, with 109,856 aircraft movements, but total passenger volume was still 9% lower than 2019’s number, at 13.3 million passengers. With most international borders still closed for leisure travel, China’s domestic numbers are expected to grow further in the Lunar New Year holidays in mid-February and Labor Day holidays in May. Serving as a testament to China’s domestic air transport vigor, its two largest airlines in the full service and low cost segment, China Southern Airlines and Spring Airlines, posted marginal net profits in the third quarter of this year with domestic traffic alone.

There are still sporadic COVID-19 cases in a handful of Chinese cities, prompting swift city lockdowns and flight cancellations. This start-stop trend will likely continue, along with strict restrictions on international capacity into China.

Chinese carriers are continuing to take deliveries of new aircraft, both Western and domestically built types like the COMAC ARJ21 regional jet, focusing on the expansion of the booming domestic capacity. 

Seeing the role air cargo has played in both distributing medical supplies and keeping the manufacturing sector going through the global lockdown, the central government has also given its blessing to further expansion of its air cargo sector, both by building new cargo-handling infrastructure and establishing new cargo links. 

To push traffic into the new Hainan Free Trade Port (FTP) initiative, the Civil Aviation Administration of China will allow carriers up to seven weekly passenger and cargo flights under the new seventh freedom of the air trial on Hainan Island. Carriers are permitted to operate flights between two foreign countries without landing in the airline’s home country.

Beijing has also actively promoted the Greater Bay Area, consisting of Guangzhou, Hong Kong, Macau and Shenzhen. A new LCC named Greater Bay Airlines has reportedly applied for an air operator’s certificate in Hong Kong to serve the region, which aims to be China’s version of Silicon Valley. The airline is believed to be backed by Chinese billionaire Bill Wong Cho-bau, who is also behind China-based Donghai Airlines, and will adopt the Boeing 737 as its narrowbody of choice. Reports also say the startup is keen to take in around 500 staff affected by the layoffs at Cathay Pacific Group. 

Hong Kong

In Hong Kong, COVID-19 claimed Greater China’s first major airline casualty, Cathay Dragon. On Oct. 21, the Cathay Pacific group announced that it will permanently shut the 35-year old brand, along with 5,900 jobs across the entire group. Cathay Pacific and newly acquired LCC HK Express will absorb Dragon’s fleet and network in Mainland China, streamlining the premium segment into a single brand.

The highly anticipated air travel bubble (ATB) between Hong Kong and Singapore was planned to be launched on Nov. 22. However, it was suspended just a day before due to surging cases in Hong Kong. Mutually benefitting for Singapore Airlines and Cathay, the initial idea for both carriers was to mount alternate daily flights in the early weeks before increasing frequency to daily flights. Prior to the suspension, a number of ATB flights were fully booked, even with inflated prices and the need to undergo at least three self-funded COVID-19 tests.


Despite being globally lauded for its efforts in containing the virus, Taiwan remained cautious in resuming commercial passenger flights outside of the island. It was in fact Taiwan’s three carriers, China Airlines, EVA Airways and Starlux Airlines, that began offering passenger experiences like aircraft boarding tours, which eventually spun off into flights to nowhere. These events were extremely popular in Taiwan, with tickets sold out within minutes of launch. The three carriers have collectively conducted more than 10 flights, tagged to events like Father’s Day and the Mid-Autumn Festival. 

Taipei-based startup Starlux remains optimistic for the post-pandemic world and is one of the few airlines to continue placing aircraft orders and taking deliveries. It will lease eight Airbus A330-900s to fill the gap of the delayed A350-900. It will also add one more A350-900, bringing its total order to nine A350-900s and eight -1000s. The airline is also adding three more A321neos to the ones it leased from GECAS for new services to Bangkok (BKK), Osaka (KIX) and Tokyo Narita (NRT) that begin in December.