Caixin Weekly | Multiple European Airlines Reduce China-Europe Routes Amid Growing Competitiveness of Chinese Carriers (AI Translation)

财新周刊｜多家欧洲航司削减中欧航线 中国航司竞争力凸显

Scandinavian Airlines (SAS) halted its routes to China on November 9, coinciding with several airlines reducing their Europe-China routes, including Virgin Atlantic, British Airways, and Lufthansa. By early December, KLM, a part of Air France-KLM, also lessened its flights from Amsterdam to Beijing and Shanghai, dropping from seven weekly flights to five and six, by January 2025. The reasons include increased detour costs due to the Russia-Ukraine conflict, which forces European and American carriers to avoid Russian airspace, thus increasing their operational costs by over 10%. These factors, coupled with reduced post-pandemic travel demand, have left European airlines unable to compete with Chinese carriers who dominate the market, holding an 84.2% share, while foreign airlines' share has diminished to 15.8%. [para. 1][para. 3]

North American airlines are more aggressive with reopening routes, leading to new proposals such as United Airlines' application for a Los Angeles-Beijing route by May 2025. Meanwhile, restrictions from the pandemic-era have lifted, such as Canada's new policies increasing China-Canada flights, reviving approximately to 11.2% of 2019 levels. Despite challenges, U.S.-China flights have recovered to 21.9% of 2019 levels, with shared percentages between Chinese and foreign carriers. [para. 6]

European foreign airlines have withdrawn amidst "unfair competition" claims regarding uneven operating conditions, including longer flight paths and increased costs. Major players like KLM feel policy changes are necessary, but governments, like the U.S. administration, haven't significantly addressed airline requests for restrictions against Chinese carriers. Airlines leverage joint ventures to maintain their presence in this key market despite route suspensions. [para. 7][para. 9]

Unable to compete due to increased costs from detours around Russian airspace and high operational expenses, many European airlines have reduced, paused, or restructured operations. Data indicates Scandinavian Airlines and Lufthansa are making adjustments, with Lufthansa cutting four weekly flights to China compared to the previous year. Similarly, an overall reduction of flight services is attributed to weaker demand, less profitability, and logistical challenges such as supply chain issues that have led to workforce and parts shortages, hampering full recovery to pre-pandemic levels. [para. 19][para. 20]

Navigating the complexities of geopolitical constraints, rerouting, and increased competition, European airlines prioritize more profitable regions, like Japan and South Korea. In contrast, Chinese airlines exploit unhindered access to Russian airspace, facilitating more efficient and cost-effective service on the China-Europe route, which European carriers find harder to match given the extras costs of bypassing Russian airspace. [para. 18][para. 23]

The EU and major European airlines are concerned about further losing market share to Chinese competitors, as seen through actions such as advocating for flight restrictions by Lufthansa and Air France-KLM. Despite this, the prospects of changes in policy remain uncertain due to the intertwined commercial and diplomatic interests between Europe and China. [para. 34][para. 38]

Furthermore, capacity considerations heavily affect this competitive landscape, with China’s aviation policies being more open and actively promoting its tourist economy through initiatives like visa exemptions. The accessibility draws increased foreign visitors, boosting demand for China-bound flights while European routes suffer from geopolitical rerouting factors. [para. 35][para. 44]

Calculated restructuring is evident as airlines like LOT Polish Airlines, Lufthansa, and British Airways negotiate service routes, reflecting peak and off-peak demands while balancing commercial viability. Despite setbacks and complaints from European competitors, ongoing diplomatic dialogues and reciprocal international agreements are challenged by evolving market conditions and fluctuating demand levels. [para. 26][para. 48]