China airlines offering 'cabbage prices'

Jakarta

CHINESE airlines are offering tickets at what are known colloquially as cabbage prices as they start restoring seat capacity following drastic capacity cuts enforced by the Covid-19. A one-way direct trip from Shanghai to Chengdu on Juneyao Airlines costs just 90 yuan (S$18) plus 50 yuan in taxes. That's a three-and-a-half hour journey, about the same as a flight from New York to New Orleans.

Chinese carriers are adding nearly three million seats back into scheduled services this week, primarily for domestic routes, according to OAG Aviation Worldwide. "The dramatic capacity recovery has led to very low fares being made available," analyst John Grant wrote in a weekly update on the market. China Southern Airlines is adding 684,000 seats and China Eastern Airlines is increasing capacity by 566,000 seats, Mr Grant said.

China's overall capacity is still only around half the 16.9 million seats available as at Jan 20, when there were only hundreds of reported infections worldwide, but the recovery this week restores its rank as the second-biggest market in the world.

Online news portal Sina.com said Chinese airlines posted losses of more than 10 billion yuan in February as revenue fell 37 billion yuan, citing industry estimates. Its report late on Monday also flagged the availability of tickets at "cabbage prices" as grounded flights get restored.

While the picture turns more positive for China, the neighbouring markets of South Korea and Hong Kong are still sharply reducing capacity, both by more than 20 this week, according to OAG. Since Jan 20, Hong Kong's capacity has slumped 71 per cent, with Cathay Pacific Airways shrinking from more than 400,000 seats to 119,860, OAG said.

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The International Air Transport Association on Feb 20 said the virus could result in a 13 per cent drop in passenger demand for airlines in the Asia-Pacific region this year, translating into a revenue loss of US$27.8 billion. The bulk of that would be borne by carriers registered in China, with US$12.8 billion lost, it said. BLOOMBERG