U.S. Airlines Cancel Some China Routes Amid Industry Headwinds

Two U.S. airlines have dropped routes between China and the U.S. this week, bringing the number of cancellations to five over the past two years — the victims of strong competition in one of the world’s biggest travel markets.

American Airlines Inc., the largest U.S. operator by passengers, said it will discontinue a direct route between Chicago and Shanghai in late October, while Hawaiian Airlines will suspend a thrice-weekly nonstop flight between Honolulu and Beijing the same month.

“Our Chicago-Shanghai service is unprofitable and simply not sustainable in this high fuel-cost environment and when we have opportunities to be successful in other markets,” Vasu Raja, American’s vice president, said in a statement Tuesday.

That’s the second cancellation in four months of an American Airlines route to China, after it dropped its Chicago-Beijing route in May. American still operates daily flights to the Chinese capital from Los Angeles and the Dallas-Fort Worth metroplex in Texas.

Hawaiian Airlines, which operates only one direct flight between the U.S. and China, announced Wednesday it will scrap the Beijing-Honolulu route after China’s weeklong National Day holiday in October. It didn’t provide further details.

However, both airlines said they will seek approval to revive their respective routes when “conditions approve.”

According to industry tracker VariFlight, the Chicago-Beijing flights operated by American were 80% full on average last year, while the load factor for Hawaiian’s Honolulu-Beijing route has been under 60% since its maiden flight in April 2014.

International players are scrambling for shares in China’s travel market, as a rising middle class over the past few years has fueled an outbound travel boom that is outpacing tourism at home. American Airlines last year spent $200 million to acquire a minor interest in China Southern Airlines Co. Ltd., the country’s biggest carrier, giving both access to the world’s two biggest travel markets.

Smaller Chinese carriers, such as Xiamen Airlines and Sichuan Airlines, have launched nonstop flights to Europe and the U.S. as well as expanded their fleets, thanks to ample financial support from local provincial governments, Caixin reported in June.

Walter Dias, United Airlines Inc. managing director, told Caixin in February that the carrier is scaling back its operations in China following major additions over the last two years that have led to excess capacity.

“It’s been a great growth story,” he said, describing the market for routes between the U.S. and China. “However, a light bulb has suddenly gone off in everyone else’s head. They’ve realized China is a great market, we should fly there. … I always say that the market is the boss, they tell me when we should add a flight. Right now, the market is telling us, ‘Oh man, I had a lot of food, I had to digest this all.’ So right now, I don’t think the market is ready for another new flight.”

Industry researcher Boyd Group International predicts that Chinese passengers arriving at U.S. airports will nearly triple to 12.8 million in 2024 from 4.3 million this year, with more independent travelers, compared to tour groups, embarking on those journeys.

Contact reporter Jason Tan (jasontan@caixin.com)