Chinese Air Travel Has Biggest Drop Since Start of Pandemic
Chinese Air Travel Posts Biggest Drop Since Start of Pandemic
(Bloomberg) -- The number of seats being offered by airline carriers in China dropped the most since early in the Covid-19 pandemic, as rising cases of the delta variant spurred fresh restrictions on movement.
Seat capacity plunged 32% in one week, hastening a decline in the country that began at the end of July, based on data from aviation specialist OAG. China’s stumble sent global capacity on a weekly 6.5% slide, as travel comebacks also stagnated in Europe and North America.
The surge in Chinese cases has dealt a fresh blow to tourism on the mainland during the peak summer holiday. China, which at one point during the pandemic overtook the U.S. as the world’s largest aviation market, is battling its broadest outbreak since the virus first emerged in the city of Wuhan in late 2019.
After starting in India, the delta variant spread to the U.K., interrupting its reopening plans, and is now putting recoveries in the U.S. and European Union at risk. Other Asian countries, such as Thailand and Vietnam, also continue to struggle with outbreaks.
Globally, airline capacity now stands at 64% of pre-pandemic levels, after a 4-point slide versus 2019 in a single week. The U.S. was little changed, as was Europe, following rapid gains in June and July.
“The data is beginning to point to a recovery being further away than we had perhaps hoped a few weeks back,” said John Grant, the chief analyst at OAG. “In the next few weeks, airlines will begin to look long and hard at their winter 2021/22 programs, and many of the data points would suggest that capacity will not be much better than last winter.”
As in China, the U.S. recovery has mainly been driven by a surge in domestic travel.
Despite a partial reopening with Europe, the U.S. has plateaued for almost two months as airlines struggle to re-establish capacity following deep cuts earlier in the pandemic. Last week, budget airline Frontier Airlines Holdings Inc. raised fresh concerns when it attributed softness in its bookings to the delta variant.
“A proper recovery will only happen when restrictions are lifted and confidence is restored.” said Anne Agnew Correa, the vice president of forecasting and modeling at MBA Aero in Arlington, Virginia. “Many airlines were able to benefit from confidence domestically this summer, but were still stifled by international restrictions.”
Transatlantic travel could be further restricted. The European Union is weighing reintroducing travel restrictions for visitors from the U.S. next week as coronavirus case numbers rise again, Bloomberg News reported on Friday.
After rapidly scaling up through July, European capacity grew just 0.3% week on week. That may complicate efforts for carriers looking to raise funds. Virgin Atlantic Airways Ltd. is said to be considering a public offering in London as the company gears up its business for recovery from the pandemic, while Deutsche Lufthansa AG is looking to raise cash to repay its 9 billion-euro state bailout package.
“The reopening remains multi-speed, with intra-EU travel recovering faster than international, and leisure travel before business travel,” said Alex Irving, an analyst at Bernstein. While major European airlines, should have enough liquidity for the recovery, a delay in the reopening of trans-Atlantic travel “would lead to a longer period of depressed earnings for the network airlines,” he said.
Zero Tolerance
China’s latest resurgence, which began in the eastern city of Nanjing, has spread across more than half the country’s provinces and spurred tighter curbs on movement. Capacity in the country is now at its lowest compared with 2019 since the week of Feb. 8, when China was battling an outbreak at the start of the Lunar New Year holiday.
Air travel came back quickly after that bout, and Chinese health officials expect the current outbreak to be brought under control in two to three weeks if containment measures are fully enacted.
While the majority of the country’s vast population is vaccinated, a former health chief who is now a consultant to China Health Economics Association said in an opinion piece that the country will strictly control its borders to stop Covid-19 from gaining a foothold. The country will also continue to try to stamp out the virus rather than “learning to co-exist” with it.
Hong Kong-listed Beijing Capital International Airport Co. pared back its outlook last week, saying it expects its net loss to widen to as much as 860 million yuan ($133 million) in the six months though June due to the pandemic’s impact on passenger throughput.
©2021 Bloomberg L.P.