China: Domestic air traffic recovery uncertain due to zero- COVID-19 policy

 Friday, December 10, 2021 

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The domestic air traffic in China, once the world’s envy after a fast rebound during the pandemic, is faltering due to a zero-COVID-19 policy that has led to tighter travel rules in Beijing and weaker consumer confidence after repeated small outbreaks.

The outlook for the fourth quarter, normally a popular time for southerners to head north for winter breaks and northerners to head south for warmer weather, is dimming due to COVID-19 related disruptions at a time when international traffic is negligible.

The domestic capacity at the country’s three biggest airlines reached around 115% of pre-COVID levels in April but by October had fallen to around 77% due to outbreaks with lower peaks after each rebound, HSBC data shows. That contrasts with a steadier U.S. domestic recovery.

In mid-November, the situation worsened when the city of Beijing announced that travellers from any Chinese city that had reported even a single COVID case within the past 14 days would be restricted from entering the capital, which is being protected ahead of the 2022 Winter Olympics.

Hangzhou, the capital of Zhejiang province, slashed its number of flights to Beijing to just one per day due to two local cases.

Air China, China Eastern Airlines and China Southern Airlines posted a combined loss of nearly 8 billion yuan in the third quarter. There is potential downside risk to combined fourth-quarter estimates that have a current consensus loss of 7.2 billion, HBSC analysts said.

Domestic air passenger traffic stood at around 40% of pre-COVID levels in November, while the number of flights dropped to around 60% of 2019 levels, according to aviation data provider Variflight.

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