Impact of COVID-19 on China Aviation Industry Research and Forecast 2019-2025

China is the fastest-growing aviation industry globally owing to the robust growth in the demand for air travelling, expanding middle-class population, and rising foreign trade operations. In addition, government initiative for airports construction and availability of low-cost airlines has led to the growth of the China aviation industry. As per the Civil Aviation Administration of China (CAAC), in 2018, Chinese airports handled nearly 1.3 billion passengers, increased by 10.2% as compared to 2017. Among these, international flights transported nearly 126 million passengers and domestic flights transported nearly 1.1 billion passengers.The turnover of mail and cargo recorded 16.7 million tons in 2018. There were 37 airports exceeding 10 million annual passenger throughput in 2018. In terms of annual turnover regarding cargo and mail, there were 53 airports reached more than 10 thousand tons.

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Among these, 48.8% of cargo and mail handled in all domestic airports were reported in Guangzhou, Shanghai, and Beijing airports. The country is primarily focusing on increasing entire competitiveness of airport clusters with coordinated efforts, which aims to leverage the establishment of world-class airport clusters. As a result, the China aviation industry has demonstrated its competitiveness in the global aviation industry.However, coronavirus epidemics have devastated the Chinese aviation sector, as most of the countries have restricted air travelling to and from China. The outbreak arises from China, which further spreads to other parts of the world due to international travelers.

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Therefore, international air traveling is banned in multiple countries, which will result in the loss of passenger revenues in 2020. As per the International Air Transportation Association (IATA), in China, $22.2 billion losses of passenger revenue are anticipated to be reported in 2020. In February 2020, the Chinese airlines, including China Southern Airlines, and China Eastern Airlines declined their capacity by nearly 70% due to the reduction in the demand amid COVID-19. In Hong Kong International Airport (HKIA), the volumes of both passenger and cargo were sharply declined in January and February 2020. In February 2020, HKIA handled 18,005 flight movements and 1.9 million passengers, which shows a year-on-year decline of 44.5% and 68%, respectively.

Cargo throughput reduced 8.9% than February 2019, to 251,000 tons. This was primarily affected by the weak demand for travelling amid COVID-19 outbreak, along with quarantine measures and immigration restrictions implemented by authorities in several regions and countries. The global airlines have cancelled their flights in China due to the coronavirus crisis in the country. For instance, in January 2020, British Airways suspended direct flights to and from China, due to the confirmed cases of COVID-19 infection in Germany and France. On 28th February 2020, United Airlines have extended the suspension of flights between the US airport hub locations and Hong Kong, Shanghai, Chengdu, and Beijing through 30th April 2020. This measure has been taken due to the significant drop in the demand and outbreak effect.

Due to this challenging condition, CAAC declared 16 measures, which is intended to promote the stable development of the aviation sector. CAAC will grant additional financing support for global services and offer subsidies to Chinese carriers. It will also decrease the air control fees and airport parking for all carriers. In addition, the charges, including take-off and landing will be reduced by 10%, with waive off parking fees for class 1 and 2 airports. Since 23rd January 2020, the fee reductions have been placed and will remain exists until further notice. The country will also focus on recommence airport projects, which were halted due to the pandemic.

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Some crucial players affected by the coronavirus epidemic include China Southern Airlines Co., Ltd, China Eastern Airlines Corp. Ltd., Airbus SE, Air China Ltd., and China Communications Construction Co., Ltd. (CCCC). On 5th Feb 2020, Airbus SE has closed its assembly plant in Tianjin, China, due to the coronavirus crisis. Supply chain concerns and government restrictions have led to a closure of the company’s Chinese operations. This factory produces six A320 aircraft every month, which accounts for nearly 10% of Airbus narrowbody production.

Therefore, the production of A320 aircraft and supply is expected to be significantly affected by this decision. Additionally, after some relaxation from the spread of the virus in the country, the Chinese airlines are focusing on increasing passenger seat capacity followed by severe capacity cuts due to COVID-19 epidemic. China Southern Airlines Co. and China Eastern Airlines Corp. are increasing their passenger seat capacity to restore its revenue and ranking in the China aviation industry.

Verticals Affected Most

• Passenger Airlines
• Cargo Airlines
• Aircraft Manufacturing Companies
• Airports Managing Companies
• Others

Company Profiles

• Air China Ltd.
• Airbus SE
• Airbus SE
• China Eastern Airlines Corp. Ltd.
• China Southern Airlines Co., Ltd.
• Hainan Airlines Co., Ltd.
• Juneyao Airlines Co., Ltd.
• Ruili Airlines Co., Ltd.
• SF Express Co.
• The Boeing Co.

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