Chinese Airlines surge in Europe, Middle East amid rising costs for Western competitors

Financial Times highlights in its article that China's major state-owned airlines are rapidly expanding their reach into Europe and the Middle East. 

China's three largest state-owned airlines are swiftly increasing their routes and flight capacity to Europe, leveraging their ability to fly over Russian airspace, which provides them with a cost advantage over regional competitors. 

In contrast, many Western airlines have reduced direct flights to China, with carriers such as Scandinavian Airlines, Lufthansa, British Airways, and Virgin Atlantic suspending some services to the mainland in 2024. The move is driven by the financial strain caused by the need to avoid Russian airspace.

Since Moscow imposed a ban on most European airlines flying through Russian airspace in 2022, as part of retaliatory measures following Western sanctions related to the war in Ukraine, flights to Asian destinations, including China, have been significantly delayed and fuel costs have soared. 

Chinese airlines, unaffected by the Russian airspace ban, have seized the opportunity, rapidly expanding their services and offering lower ticket prices, even as they continue to report financial losses.

European carriers have voiced concerns about the perceived unfair advantage that Chinese airlines hold, accusing them of gaining control over key routes between the two regions. To counter this, US airlines have successfully pushed the US government to impose a cap on the number of direct flights to China, in an effort to limit the growing influence of Chinese carriers. 

Lufthansa, in a statement, highlighted the "extremely unequal competitive position" European airlines face in comparison to Chinese carriers, citing lower costs, greater government backing, and the ability to overfly Russia as significant advantages.

Western industry executives have raised concerns about the actual demand for flights operated by Chinese airlines, with some speculating that these routes could be running at a loss. Analysts also suggest that political factors play a role in the expansion of these services, particularly as Beijing introduces visa-free initiatives aimed at attracting more tourists back to the country.

While some Western carriers have cited weak demand for flights departing from China, UBS reports that international passenger demand for the major Chinese airlines has nearly returned to pre-pandemic levels. 

In addition, major Chinese airlines have increased direct flights to the Middle East, driven by a growing business relationship between Asia's largest economy and the Gulf region, particularly with Saudi Arabia. Scheduled flights for the three largest Chinese carriers to Saudi Arabia in the first nine months of 2024 surged by over seven times compared to the same period in 2019, according to aviation consultancy Ishka. Flights to the United Arab Emirates also saw a 40 per cent increase.

The three major Chinese carriers play a crucial role for the Beijing government, as aviation is considered a key driver of ongoing economic growth, according to analysts at Ishka. They also note that the airlines benefit from route subsidies and significant credit facilities due to their state ownership.

Although the Chinese airlines are capitalizing on their cost advantage over European competitors, the country's mixed economic recovery from the Covid-19 pandemic has meant they continue to report losses. 

Analysts noted that the major Chinese airlines have been particularly affected by slowing consumer spending in China and increasing competition from low-cost carriers on domestic routes. According to aviation data provider ForwardKeys, fares for flights departing from Chinese airports in 2024 are more than 20 per cent lower compared to 2023, affecting both domestic and international flights.

By Naila Huseynova