Recently, there has been a lot of discussion in China's civil aviation circle. It is possible that China's international routes will not be allowed to use fiscal subsidies at will in the future.
In the future, the competition among domestic airlines will become more and more fierce, especially concentrated in the "3+7" cities in China.
Before discussing this topic, it is necessary to explain "3+7":
"3" refers to the three international aviation hubs of Beijing, Shanghai and Guangzhou.
On the basis of radiating the surrounding aviation transportation circle, these three cities support the construction of the "Air Silk Road", steadily develop the European and North American channels, actively expand the six major international economic cooperation corridors and the Latin American, South Pacific, Indian Ocean and African channels, and strengthen the all-round portal complex functions of international aviation hubs. Simply put, these three cities are free to fly around the world, giving priority to the "Belt and Road" countries. This may also be the reason why we have seen a large number of routes to Central Asia, the Middle East and Africa resume and increase flights this year.
"7" refers to the seven international aviation hubs of Chengdu, Shenzhen, Chongqing, Kunming, Xi'an, Urumqi, Harbin, etc. The requirements of these seven cities are to build an international route network with location advantages and enhance the complex function of international aviation hubs as location gateways for specific regions. For example, Harbin may focus on developing Russian routes in the future, Kunming will become a gateway for southwest flights to Southeast Asian countries in the future, and Urumqi will increase flights to Central Asian countries in the future.
In fact, judging from the current route arrangements, this is indeed the case. The location determines the route layout of these second- and third-tier cities in China, and will further restrict the development of regional international aviation hubs in the future.
So, where does the view that international routes should not be arranged for route subsidies in the future come from?
From the perspective of airline development, obtaining the concept of "hub operator" in important cities means that there will inevitably be more policy support in the future, but this also means that airlines will have to sacrifice some of their own interests.
Because airlines did not participate in airport construction before, and airport planning and design were basically not the turn of airlines to participate, to put it bluntly, the interests between airlines and airports are often unequal.
For example, when a large number of airports are idle, the first thing the airport thinks of is to allow an airline to operate as much as possible regardless of whether it is loss-making or not, and airlines often have more concerns.
Then, after the concept of "hub operator" was proposed, it was as if the airport was bidding. Whether airlines will bend down in the future to tilt more resources is worth paying attention to. Perhaps, in the future, opening up policy routes, tolerating short-term profit losses, and "calculating the big account" from the perspective of local airports are a math problem that airlines have to face.
For the "international aviation hub operators" who have entered the game, how much and how the subsidy policies of airports and local governments give are also core issues that test the wisdom of local management.
The financial report data recently released by Lufthansa also showed that from April to June 2024, the company achieved a net profit of 469 million euros, a year-on-year decrease of 47%. According to the analysis, in addition to a series of employee strikes, the decline in ticket prices for Asian flights has also dragged down profits.
In the business world, the survival of the fittest, these three cities have relatively sufficient local passenger flow, and at the same time can serve the three most economically active city clusters in China, so it is understandable that flights are increased. But when more advantageous civil aviation resources gather, it will be a new round of blows to some foreign airlines struggling on the line of life and death. It should be noted that most foreign airlines have abandoned China's second- and third-tier cities that cannot get subsidies and do not make money in the post-epidemic era. Shanghai and Beijing are the only two Chinese routes they have retained.
Faced with the strong layout of domestic airlines, some countries have begun to take countermeasures. In July this year, Austria fired the "first shot" against the opening of Chinese airlines, blocking the application of China Eastern Airlines to open the Shanghai-Vienna route. A person in charge of the Austrian Air Traffic Control Company clearly pointed out that "in view of Russia's current restrictions on airspace and China Eastern Airlines' competitive advantage over Austrian Airlines, a local airline in Austria, approving the application is contrary to the overall economic interests." In April this year, major US airlines and aviation unions asked the Biden administration not to approve the addition of new China-US routes in the form of an open letter, citing the Chinese government's continued "anti-competitive policies."
In the future, international airports in small Chinese cities may no longer receive local subsidies, but it is hard to say how much help this can be for some foreign airlines in dire straits on Chinese routes!
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