Two-thirds of China’s passenger planes have been grounded as travel restrictions and fear sparked by the coronavirus outbreak batter passenger numbers and force the country’s airlines to scale back operations dramatically. The total number of passengers carried by Chinese airlines from the end of the lunar new year break on January 27 to February 12 was 10.21m, down 70 per cent compared with the same period a year ago, according to the Civil Aviation Administration of China. Less than half of all seats were filled on an average flight during the period, according to the CAAC. Collapsing passenger numbers have forced airlines to slash routes and put pilots on unpaid leave. Across China up to 70 per cent of aircraft are grounded as a result, according to industry analysts.
While China ‘s big three carriers – Air China, China Eastern Airlines and China Southern Airlines – will be able to weather the storm, smaller and more indebted airlines will be vulnerable should the virus continue to spread, analysts added. “We are in uncharted waters,” said Ivan Su at Morningstar. “The bigger airlines, the Chinese state-backed ones, will get through this, as long as the virus gets contained within the next month or two.”
HNA Group, a Chinese conglomerate that owns several airlines, may also be hurt, according to two aviation experts. The once highly-acquisitive group has been disposing of assets in an effort to reduce its vast debt pile and the coronavirus has put “considerable lossmaking pressure” on the company, according to a director who declined to be named at the China Civil Aviation Science Technology Academy, a think-tank affiliated with the Civil Aviation Administration. Unless passenger numbers return to normal in the next three months, the group could experience financial difficulties because of its high leverage, the director said. In that event, the big three carriers might pick off parts of the HNA portfolio , he added.
The company has already placed its pilots on unpaid leave, according to two people with knowledge of the situation. “This is largely due to HNA’s tough financial position. Other domestic airline companies can still hang on for a bit,” said one. HNA did not immediately respond to a request for comment. Chinese carriers have already been forced to refinance their fleets as a result of the virus outbreak, according to D6mhnal Slattery, chief executive of jet leasing company Avolon.