Amid Virus Clouds, Airlines Seek Silver Lining in Charter Services

Chinese airlines are targeting enterprises and local governments with chartered air services to bring back their workers stranded by the Covid-19 outbreak, seeking to offset a sharp drop in domestic air travel that has weighed on their finances.

Millions of Chinese who work in big cities like Beijing and Shanghai have become stranded in their much smaller hometowns over the last few weeks, and are now having difficulty getting back to the cities where they work due to travel restrictions aimed at containing the virus. Most went to their hometowns for traditional Lunar New Year family reunions in late January when the outbreak was in its early stages.

Over 20 airlines, including giants China Southern and China Eastern Airlines, have been putting out chartered planes since Tuesday catering to companies and government agencies that need to transport their staff from hometowns back to offices. Prices are decided by a number of factors, including date and departure city, Caixin has learned.

Budget airlines are also getting in on the act, with leading carrier Spring Airlines carrying a company’s 165 employees from the southwest province of Yunnan to Shanghai on Tuesday. Such services are a makeshift response to the Covid-19 containment measures that have curbed road transport and slashed demand for air traffic.

The resulting lack of passengers is creating major problems for the country’s transport industry. Passenger air trips in China fell 47.5% year-on-year for the period from Jan. 11 to Feb. 18, and over 20 million domestic and international trips were scrapped as of Jan. 15, according to data from China’s Ministry of Transport. That brought total losses for the industry to more than 20 billion yuan ($2.8 billion), it said.

In addition to making loan repayments on planes that they own, airlines must also honor aircraft leases as well as pay staff salaries and parking expenses for aircraft, putting pressure on their cash situation, said Zhanfu Yu, a partner at consultancy firm Roland Berger. He added the chartered plane services represent an active move taken by carriers to boost business in a depressed market.

However, operating chartered plane services isn’t always as straightforward as it seems.

Such charters could require opening of new routes, which requires approval from the country’s Civil Aviation Administration (CAAC), said Mao Yi, spokesman for the Spring Airlines. Carriers will also need to assess the departure and landing cities, Mao added.

Contact reporter Lu Yutong (yutonglu@caixin.com)