The rebound in domestic flying favours American and Chinese airlines
The industry-wide picture conceals disparities, however. Some airlines are struggling despite having cut costs, slashed fleets and shored up balance-sheets with commercial loans. Others are brimming with confidence. Big American and Chinese ones with large, increasingly virus-free domestic markets will return to profitability first. Frugal low-cost carriers that went into the pandemic in the black are close behind.
Paternalistic governments have dug deep into their pockets during the pandemic. Between its onset and March this year public handouts to aviation exceeded $225bn globally,calculates. This largesse helps explain why fewer carriers entered bankruptcy worldwide in calamitous 2020 than in 2018 or 2019 , according to Cirium.
. Last year China, where covid-19 emerged but was suppressed more successfully than in the West, overtook America as the world’s biggest domestic market by capacity. Flights within China are back to levels from 2019, reckons Citigroup, a bank. The Chinese market is similarly carved up between a few big carriers—Air China, China Southern and China Eastern. As a result, their revenue per passenger-kilometre is twice what it is in nearby South-East Asia, where competition is fiercer. With Chinese domestic travel more or less back to normal, and their costly geopolitical obligations to expand loss-making international routes put on ice because of covid-19, the trio are in a better shape than ever before.
The return of short-haul international travel will revive the fortunes of the second group of winners: low-cost carriers in highly vaccinated places, where borders are gradually reopening and quarantine rules are being relaxed. European companies in particular stand to benefit from pent-up demand for holidays and visits to families and friends.
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