Flight curbs in China could hurt airlines, drive airfares up, analysts say

Investors are demanding clarity on potentially sweeping air traffic restrictions on the mainland that could cut flights to major airports in the east by a quarter for up to three weeks.

Aviation industry experts believe airfare rises of as much as 10 per cent could be needed to compensate for the lost income, a sufficiently large bite to trigger disclosure statements to stock exchanges.

No such statement has been issued so far, despite heavy cancellations - which the media say have been caused by major military exercises - that have cut about 10 per cent of flights to and from Shanghai since Monday.

Investors were first rattled by a microblog post from China Central Television's finance channel that 12 airports, including two in Shanghai, would be subject to air traffic control for 26 days that would require airlines to reduce relevant flights by 25 per cent.

The post was deleted within hours but not before it had been widely reported by other state media, which triggered market speculation that a massive military exercise was the source of flight disruption.

"It is unprecedented for mainland authorities to announce in advance an air traffic restriction and for so long, if it is until August 15," Kelvin Lau, the head of transport and industrial research at Daiwa Securities, told the South China Morning Post.