The year 2020 will no doubt go down in history as the most turbulent the aviation industry has experienced.
As we enter the second half of 2020, questions remain of who will lead the industrial recovery, and of which country will see recovery.
January, when the Spring Festival began, was supposed to be the peak travel season for China. But as Wuhan announced its lockdown, air passenger traffic across the country began to rapidly decline.
February saw the spread of the epidemic and travel restrictions, leading all domestic airlines to their worst single-month performances in history.
Flight suspensions due to the outbreak of SARS in 2003 occurred in the off-peak season, meaning the impact was minimal. The impact this time around has been far greater.
Due to the nation’s efforts to prevent the spread of the virus, airline transport volumes had improved by May. In June, the transportation turnover on domestic routes recovered to 65.9 percent of levels during the same period last year, and passenger traffic on domestic routes bounced back to 64.7 percent. Shandong Airlines, Xiamen Airlines and Shenzhen Airlines all recovered to 70 percent of levels seen during the same month last year.
China is on track to full work resumption, with its GDP achieving an increase of 3.2 percent in the second quarter and the civil aviation industry continuing to recover.
Global industry affected
As a result of the COVID-19 pandemic, all airlines globally have been severely affected.
According to a forecast from the International Air Transport Association, global airlines are set to lose a total of $84.3 billion in 2020 and their net profit margins will drop by 20.1 percent. It could take five years for air travel demand to return to levels seen before the outbreak. But Chinese airlines have recovered faster and are proving comparatively resilient and flexible.
Nearly 20 airlines worldwide have now filed for bankruptcy or terminated operations, with most based in Europe and the US. No airline in China has declared bankruptcy due to the outbreak of COVID-19.
In June, China’s civil aviation witnessed a total of 30.74 million passenger trips, recovering to 58 percent of its level during the same period last year. There were 30.59 million domestic passenger trips in the month, recovering to 64.7 percent of levels during the same period last year. In contrast, the US regulator released data on the number of US airport security screenings, showing that in June the US saw 14.48 million flight passenger trips, only 19 percent of last year’s level.
Since February, China Southern Airlines has been continuously strengthening its recovery, and its capacity has increased significantly month to month. According to data from VariFlight, the number of seats sold by China Southern Airlines in May exceeded that of American Airlines, making it the world’s largest airline that month.
Data from the Civil Aviation Administration of China showed losses in China’s civil aviation industry have decreased month by month. Losses of 7.62 billion yuan ($1.09 billion) were recorded in June, a reduction of 17 billion yuan from February and 3.8 billion yuan from May. The industry lost a total of 34.25 billion yuan in the second quarter, down 3.85 billion yuan from the first quarter.
According to Delta Air Lines’ second-quarter financial report, its losses surged from $534 million in the first quarter to $5.7 billion in the second, exceeding those of China’s entire civil aviation industry. That shows the US aviation industry was hit hard in the second quarter, and the situation has not yet improved.
Leading recovery
As coronavirus cases mount in the US, India, Brazil and other countries, it is hard to imagine a global aviation recovery will be seen in the near future.
Many countries have also introduced restrictions on flights from certain areas, which have added to the overall downturn in the industry.
China will likely continue to take a cautious attitude in receiving more international flights. The huge domestic market will thus remain the recovery driver this year and, as China was the first country to bring the virus under control, the recovery of mainland airlines will continue to lead the global aviation industry.
Even if positive annual growth is not achieved, the domestic industry’s rapid pace of recovery will lay a good foundation for 2021.
And an industry reshuffle may be inevitable.
Compared with European and American airlines that receive government assistance and are burdened with huge debts, airlines in the Chinese mainland have more flexible strategic options.
Uncertainties are common under the pandemic, and where the global aviation industry will go from here is also in doubt. Will the historic pandemic permanently alter the pattern of international air transportation? Will the three major aviation alliances survive in the future? What will post-pandemic cooperation between airlines look like? These questions as yet have no answers.
Though there will not be major changes in the structure of the domestic market, airlines that stand out during the pandemic will likely take on larger roles. And small and medium-sized airlines may be the most impacted by the crisis.
Chinese airlines that struggled through the extremely challenging first half of 2020 are now looking forward to new opportunities in the second.
Passengers arrive in Beijing Daxing International Airport on June 1 as domestic flights gradually recover in China. Photo: cnsphoto
