Chinese airlines dogfight for profits as route competition, railways soak up revenue
Flight loads have surpassed pre-pandemic levels on high-density routes, but China’s carriers are still struggling to balance their books
In its report, Brazilian planemaker Embraer said that passenger volumes have surged past pre-pandemic levels – putting the government’s official goal of 1.5 billion annual travellers by 2035 firmly within sight – the industry remains stuck in a structural trap of overcapacity and fare dilution.
The report said Chinese carriers remain heavily focused on already saturated trunk routes, with over 65 per cent of flights operating on high-density corridors that have more than 800 daily passengers.
In addition, flights are at almost 76 per cent of capacity as defined by domestic available seat kilometres (ASK), mostly on routes served by three or more competitors.
“The result is a market defined by frequency wars, pricing pressure and diminishing marginal returns,” Embraer said.
Fleet composition is also compounding the problem. More than 80 per cent of China’s narrowbody jets are optimised for high-capacity and short to medium-haul operations, leaving lower-density markets underserved.
High-speed rail has added another structural headwind. The report said the rapid expansion of China’s railway network has fundamentally reshaped domestic travel patterns, pushing airlines into even fiercer competition along their remaining profitable corridors.