China is stepping up efforts to save its aviation industry from a “cliff-like” plunge in business, as the sector struggles to shake off the impact of zero-Covid and China’s deadliest aviation disaster in nearly 30 years. Under the 33-point stimulus package airlines will receive significant aid from the central government, including emergency loans of CNY150 billion and a bond quota of CNY200 billion. China has big ambitions for its aviation sector and has invested billions of dollars to make it internationally competitive, including by developing its own narrow-body passenger jet, the C919, to compete with the Boeing 737 and Airbus A320.
“The Chinese government’s response to Covid right now is very different from what you see in other major air travel markets like Europe or North America, where effective vaccination programs and more decentralized political decision-making have led to an ongoing recovery in passenger boarding,” said Douglas Royce, Senior Aircraft and Engine Analyst at Forecast International. “There’s too much uncertainty over the course of the pandemic in China right now to forecast demand for new planes in the near future.” Confidence in China’s aviation sector has also been shaken following the crash of China Eastern Airlines flight MU5735 in March, killing all 132 people aboard. Industry Analysts Lin Zhijie said the sector lost close to CNY30 billion in April, the largest single monthly loss in history.
“Since the beginning of this year, due to the continuous resurgence of outbreaks, especially since March, the production and operation of the civil aviation industry has taken a sharp turn,” said the Civil Aviation Administration of China (CAAC) in a statement. The Ministry of Finance said it would offer two months of subsidies to Chinese airlines, starting from May 21, to help carriers weather the coronavirus-induced downturn and higher oil prices. But support will only be provided to airlines when their average daily number of domestic flights falls below or is equal to 4,500 per week, the Ministry said. Air China, China’s biggest state-owned carrier, said in 2019 it offered 15,436 code sharing flights per week with its partners. The central government will fund 70% of the subsidies, while local authorities will cover the remaining 30%. But the subsidies had been suspended by the CAAC over concerns that airlines might intentionally reduce services.
Skyrocketing fuel costs and a weakening yuan are adding pressure to the industry. Government subsidies and other support measures may not be enough to help airlines cut their losses, which are still mounting, Lin said. Last year, the civil aviation industry suffered a net loss of CNY84.25 billion, compared to CNY102.96 billion in 2020, the South China Morning Post reports.
