Middle East-China airline battle means cheap fares

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Despite China announcing the reopening of its borders to international air services in January, supply remains dampened amid national authority restrictions and political disputes in some markets.

This October, international capacity to and from China stands at just over half of the 2019 level, with major markets such as Thailand, Japan and South Korea eagerly awaiting a pick-up in tourists.

However, the Middle East stands out as a lead recovery market.

Headline comparisons against the winter programmes for the last five winter seasons highlight just how strong capacity growth has been from nearly every major Middle East market as the global recovery continues.

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Driving the capacity growth are several factors, some of which may only be of short to medium term benefit, whilst others are more strategic.

With Russian airspace closed for many airlines the levels of capacity on offer from European carriers to China is down by some 25 percent compared to 2019.

The more strategic developments are the expansion of flights into Guangzhou and the wider Pearl Delta market with over 34 percent more flights planned.

For many international markets from China, it’s the return of large groups that will make the difference and Saudi Arabia is making a big play for that traffic this winter.

Total capacity from China to the kingdom will increase by some 63 percent as Saudia continues its recently launched twice-weekly service.

Early load factors on the service have been very low although for Saudi Arabia and the Air Connectivity Programme that’s not as important as it may be for other carriers, but they will certainly be hoping for improved performance over the winter season. 

Threatening that hope for increased demand will be the expected launch of services to the kingdom from China’s Hainan Airlines, again supported by the Air Connectivity Programme.

Hainan enjoys considerable local Chinese market loyalty and an established holiday and group sales division, which will stimulate outbound group traffic. And this is, of course, all before the arrival of Riyadh Air in 2024.

For Qatar Airways, China is of greater significance than the UAE’s Emirates having served six cities in 2019 compared to the three of Emirates and having brought all those destinations back online earlier this year.

Operating to Chengdu, Chongqing and Hangzhou makes the Qatar network look bigger but those three cities have proven difficult to sustain for long-haul international carriers. 

The single largest connecting market for Qatar in 2019 was surprisingly Algeria, with other obscure connecting markets such as Iraq and Morocco also featuring. Sometimes those obscure routings can deliver the highest of yields for airlines.

Placing those numbers in context, the total market between China and Saudi Arabia during the winter of 2019-20 amounted to just 41,000 passengers.

The new Saudi services, the planned Hainan services and any potential Riyadh Air services in the winter of 2024-25 will result in a glut of capacity requiring massive market stimulation for any of the airlines to deliver satisfactory operating results. 

For many markets around the world the full reopening of the Chinese international market is welcome news, and for the others it’s a new market opportunity – certainly that seems to be the case in the Middle East.

Will the market expand to the required levels to fill the planned capacity? Only time will tell.

In the short term it will require massive market stimulation, very cheap air fares and a long-term view of the opportunity to succeed.

But then again, the aviation market can change very quickly in the Middle East.

John Grant is a partner at UK consultancy Midas Aviation