BEIJING—Chinese airlines are running around 90% as much domestic capacity as they did a year ago and plan to step up to 96% next week.
Loads remain poor, however. Airlines are deliberately rebuilding capacity in advance of demand, in part to make use of otherwise idle employees, industry managers said.
The latest surge in domestic capacity follows one that began in April and stabilized in May, according to available-seat-kilometer data from OAG and CAPA – Centre for Aviation.
For the three weeks beginning May 11, scheduled domestic capacity was 80% as much as a year earlier or just below, compared with an average of 63% for most of March and April.
This jumped to 90% last week and is at 88% this week. Although the schedules for next week show 96% of last year’s equivalent domestic capacity is planned, that figure might not be reached since the airlines can make late adjustments.
Also, 90% of 2019’s level does not quite mean 90% of normality, since airlines would have run more capacity in 2020 had the coronavirus pandemic not struck. In the eight weeks before the emergency was recognized in January, they ran about 6% more domestic capacity than a year earlier.
Domestic passenger load factors have been weak. For May, the average was 65.2% with only a faint upward trend, according to Chinese data firm Variflight. This is not a result of regulation: there is no limit in China on passenger load factors or spacing on domestic flights to minimize infection, though international flights cannot be more than 75% full.
Chinese state companies, including the great bulk of the commercial aviation industry, are generally not allowed to retrench or furlough employees. This is an unspoken policy aimed above all at maintaining social stability and therefore the Communist Party’s grip on power. Employing more people helps a state official’s prospects of promotion; if many people must be sacked, managers probably will not keep their jobs either.
So the marginal cost of Chinese carriers running greater capacity is lower than it would be for airlines in other countries, where people have been laid off and the payroll must rise with large-scale restoration of services. Also, the Chinese carriers, like so many elsewhere, have unused aircraft.
A further factor behind the premature rebuilding of capacity, managers said, is that running services as normally as possible will encourage customers to come back. Avoiding cancellations is seen as especially important.
Yields for the Chinese industry are not available but some indication for the domestic market is given by the trend in fares for a weekday economy flight on the country’s traditionally busiest air route, Beijing-Shanghai. Booked about a week ahead, the typical price for mid-June is typically CNY400-500 ($56-70), compared with CNY500-600 three weeks earlier and CNY1,000 or so before the pandemic. This also suggests that the industry is moving faster than demand in the domestic market.
Chinese airlines’ international passenger capacity has been 5-7% of the level of a year before since early April, with no sustained upward or downward trend, according to the OAG and CAPA data.
Related Content
