Shot in the arm for China’s aviation hub ambitions as homegrown airlines fly deeper into European market

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SINGAPORE: Chinese airlines have been swooping in to grab a larger slice of the China-Europe air travel market as their continental counterparts bow out – a calculated strategy that’s not just about capitalising on opportunity, but also gaining an enduring foothold in the sector, say analysts.

Observers note the move is a boon for air travellers as it preserves, if not adds, direct flight options between Chinese and European cities, and at more competitive prices to boot.

At the same time, the bolstering of air connectivity feeds into China’s wider ambitions of establishing a group of world-class aviation hubs, enhancing its international competitiveness.

What’s up in the air is whether the Chinese carriers can sustain this strategy in the near term, with demand being a big question mark as a sluggish economy and geopolitical tensions further cloud the forecast.

“With (Donald) Trump returning as US president, it remains to be seen whether he will rally Europe to adopt even tougher trade stances and policies against China,” independent aviation analyst Alvin Lie told CNA.

EUROPEAN AIRLINES FACE TURBULENCE

Over the past year, numerous European airlines have reduced or discontinued their routes to Chinese cities, attributing the decision to rising costs and challenging market conditions including poor demand. 

Dutch flag carrier KLM is one of the latest airlines to do so. Starting this year, it has reduced flights between Amsterdam and Beijing, as well as Shanghai, from daily services to just five per week.

In November, Scandinavian Airlines marked the end of its 36-year presence in China with its final flight between Shanghai and Copenhagen. This leaves Air China as the sole airline providing direct flights between Denmark and the Chinese mainland.

Since the beginning of last year, airlines such as Virgin Atlantic, British Airways, Lufthansa, and LOT Polish Airlines have also either reduced their services to China or suspended their routes altogether.

Only seven European carriers remain on China-Europe routes, down from 14 in 2019, according to Caixin Global, a leading Chinese business news platform in a Dec 2024 report. 

Meanwhile, Chinese airlines are significantly boosting their capacity on China-Europe routes.

In the first half of 2024, China’s three largest carriers – Air China, China Eastern Airlines, and China Southern Airlines – together offered around 4.67 million seats on these routes, according to Caixin. 

This marked a 21.25 per cent increase compared to 2019 and more than double the number of seats offered in the same period last year.

Chinese airlines have also been building up capacity for other markets, such as with the United States. But progress on the American front has been limited as post-pandemic recovery remains sluggish, while COVID-era flight caps on Chinese carriers have not been fully eased.

In the summer of 2019 there were some 10,400 flights from China to the US, of which 61 per cent were operated by Chinese carriers, according to an August 2024 report by British aviation data firm OAG. In the summer of 2024, there were 2,500 flights, with Chinese airlines’ share falling back slightly as they maxed out on permitted frequencies.

FLYING FURTHER INTO THE EUROPEAN MARKET

Analysts say the trend isn’t entirely unexpected, especially in the highly competitive air travel arena.

“If a lot of the European airlines have scaled back in their capacity to China, then the Chinese airlines are going to try to make up some of the difference in that,” Jamie Bloomfield, director of Propelo Aviation, a research and consultancy firm supporting the aviation industry, including air traffic managers, told CNA.

Bloomfield further pointed out there could be a strategic benefit if Chinese carriers successfully secure additional slots at some European airports – although that depends on availability and traffic rights. It would also create pressure as the slots will be lost in the next year if they are not utilised.

“(This is true) at least at the capacity-constrained airports, which tend to be the main hubs,” he explained.

“So I think they (may be) trying to fill up some of the opportunities that arise as a result of the European carriers reducing a bit, and in the longer run, they probably hope to retain that capacity if (China’s) economic situation returns.”

Chinese carriers were already starting to expand internationally before the pandemic grounded much of global aviation in 2020, and that is now taking off once again amid a “strategic desire”, said Brendan Sobie, an analyst and consultant at Sobie Aviation, a Singapore-based firm specialising in independent analysis and consulting for airlines, airports, and the aerospace sector.

Chinese airlines traditionally have “a lot” of domestic capacity, but they had to operate even more domestic flights in the initial post-pandemic period as the international market was recovering “very slowly”, Sobie explained.

“As a result, their domestic market becomes oversupplied, and they’re losing money. So, obviously they (have a) desire to try to shift a bit more back into the international market. That’s their position,” Sobie told CNA.

In the third quarter of last year, the Civil Aviation Administration of China (CAAC) approved several new routes to European cities for China’s major airlines. These include services to Bucharest, Dublin, Edinburgh, and Geneva. 

This expansion builds on other route additions in the same period, such as Air China’s Chengdu-Milan service, China Eastern Airlines’ direct flight from Shanghai to Marseille, and China Southern Airlines’ Guangzhou-Budapest route.

Chinese airlines now dominate the China-Europe route market, according to industry data. 

Between Nov 27 and Dec 3, a total of 855 flights were operated between China and Europe, reflecting a 21.6 per cent increase year-on-year, as reported by aviation data platform DAST. 

Notably, over 84 per cent of these flights were operated by Chinese carriers, a significant rise from approximately 60 per cent in 2019.

DIFFERING ACCESS TO RUSSIAN AIRSPACE

Uneven access to Russian airspace has been the primary driving factor of European airlines retreating while Chinese carriers fly high, observers note.

Russia barred European airlines and a host of other carriers from its airspace in Feb 2022 in a retaliatory response to sanctions over its invasion of Ukraine. Nearly three years on, the world’s largest country by land mass effectively remains a no-fly zone for European airlines.

This has forced them to take lengthy and costly detours, significantly increasing flight times and operational expenses. In contrast, Chinese carriers are still permitted to fly over Russia, attaining a competitive advantage.

Before the invasion, Scandinavian Airlines flights from Shanghai to Copenhagen typically took around 11 hours. Following the rerouting, its final flight in November stretched to over 15 hours.

As European airlines take the long way around, it also risks overcrowding airspace in other sectors, which could lead to flight delays and added operational costs, highlighted Bloomfield from Propelo Aviation.

“If you want to go from Europe to Southeast Asia, for example, you go into India or the Middle East, generally flying across Turkey, through the Caucasus, and then around,” he explained. 

“When all the airlines are flying the same way, it’s (manageable) today, but you could eventually face capacity issues. If you were to add flights, from Beijing for example, heading south to join that stream, it would further contribute to the congestion.”

There is usually an optimal flight path and level for fuel efficiency, Bloomfield pointed out. If airspace capacity nears its limits, planes might be asked to adjust their speed or route, potentially impacting flight times and fuel burn.

However, as the Chinese airlines currently route over Russia and concurrently there is a reduction by European carriers to and from China, the current situation may arguably have reduced those effects. In any case, there is a limit to how frequently airlines from either region can operate, Bloomfield noted.

Against this backdrop, European airlines face an uphill task in maintaining their routes to China, especially as their Chinese rivals increasingly step out from the wings.

European carriers will lose money because the Chinese airlines have “so much” capacity and are “very aggressive” with their prices, noted Sobie from Sobie Aviation. 
 
“This is further exacerbated by the fact that the (European) carriers have longer flights. European carriers just cannot sustain flights into China in that environment, it’s pretty obvious.”

At the same time, analysts have questioned whether Chinese airlines can sustain their presence in the European market, especially as passenger demand remains uncertain.

According to the earnings reports of Air China, China Eastern Airlines and China Southern Airlines – China’s “big three” carriers – the trio’s average revenue from international routes fell by approximately 30 per cent year-on-year in the first half of 2024.

CHINA’S AVIATION HUB AMBITIONS

The moves by Chinese airlines to carve out a greater share of the European market tie in with China’s aviation hub ambitions, experts note.

In August last year, CAAC outlined a three-phase strategy to develop international aviation hubs within China, with key milestones set for this year, 2035, and 2050.

According to Zhang Qing, director of the CAAC’s development planning department, the system for international aviation hubs is expected to be largely established by the year’s end.

This phase focuses on fully restoring air transport capacity and service coverage while improving connectivity, transfer efficiency, and international competitiveness.

In the next decade, the goal is to elevate these hubs to world-class standards, characterised by exceptional transport scale, international reach, connectivity, and transfer efficiency.

The expansion of European routes by Chinese airlines may indeed be a strategy to improve connectivity and work towards establishing China as an aviation hub in the long term, said Bloomfield from Propelo Aviation.

“Airlines are avoiding certain airspace for political, safety, and security reasons, but when some people buy tickets, they don’t actually factor that into their decision-making process,” he explained.

“And airfares through China have been quite low and competitive, and that probably helps by giving them extra leverage to grow their hubs.”

Fares for the “big three” Chinese airlines are roughly 5 to 35 per cent cheaper compared to European carriers for direct round-trip flights between China and western Europe, according to a UBS analyst cited in a Jan 8 report by the Australian Financial Review.

While Chinese authorities have set ambitious goals for the country’s aviation sector and are advancing them through a significant expansion of European flight routes, Lie the independent aviation analyst cautions that “substantial headwinds” remain, citing intense competition and uncertain trade and economic prospects both domestically and globally.

Donald Trump’s return to the White House also spells added uncertainty, particularly as to whether he will rally Europe to toughen its stance against China, he added.

“During his first term, we saw the trade war lead to shipping congestion, container shortages, and rising costs,” Lie pointed out.

“If such disruptions could happen to the shipping industry, they could also impact in the same way with air transport.”