Can China save its coronavirus-hit aviation sector from a ‘cliff-like’ plunge as US, Europe recover?

Under a new stimulus package unveiled by Beijing last week, airlines will receive significant aid from the central government, including loans and subsidies

But China’s zero-Covid policy is still suppressing demand for travel, while skyrocketing fuel costs and a weakening yuan are adding pressure on companies

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China’s aviation industry is set to receive emergency loans and subsidies to help offset damage caused by the pandemic. Photo: AFP

Published: 4:00am, 2 Jun 2022Updated: 12:18pm, 2 Jun 2022

Beijing is stepping up efforts to save its aviation industry from a “cliff-like” plunge in business, as the sector struggles to shake off the impact of zero-Covid and China’s deadliest aviation disaster in nearly 30 years.

Under a 33-point stimulus package unveiled last week, airlines will receive significant aid from the central government, including emergency loans of 150 billion yuan (US$22.4 billion) and a bond issuance quota of 200 billion yuan.

China has big ambitions for its aviation sector and has invested billions of dollars to make it internationally competitive, including by developing its own narrow-body passenger jet, the C919, to compete with Boeing’s 737 and Airbus’s A320.

“The Chinese government’s response to Covid right now is very different from what you see in other major air travel markets like Europe or North America, where effective vaccination programmes and more decentralised political decision-making have led to an ongoing recovery in passenger boarding,” said Douglas Royce, senior aircraft and engine analyst at Forecast International.

“There’s too much uncertainty over the course of the pandemic in China right now to forecast demand [for new planes] in the near future.”

Logistics, transport and production have experienced a cliff-like plunge

CAAC

Confidence in China’s aviation sector has also been shaken following the crash of China Eastern Airlines flight MU5735 in March, killing all 132 people aboard.

Lin Zhijie, an industry analyst and a columnist at Carnoc, a civil aviation website in China, said the sector lost close to 30 billion yuan in April, the largest single monthly loss in history.