China’s private airlines created competition for state-controlled carriers, just as the government wanted. Now, they are the ones suffering from it.
United Eagle Airlines, the first private carrier to win government approval, agreed to a takeover by a state-controlled airline last week.
East Star Airlines also halted flights two days after initially rejecting a bid from Air China’s state-owned parent.
From December, Okay Airways grounded passenger planes for more than a month because of a management dispute.
Private airlines ‘are no longer a threat,’ said Zhou Chi, chairman of government-controlled Shanghai Airlines. ‘They are all in trouble themselves.’
China’s roughly 20 private carriers have stumbled amid a cooling economy, slowing demand and rising capacity. They have also received no government aid.
By contrast, China Southern Airlines, the nation’s biggest carrier, and other state- controlled airline groups have won bailouts totaling more than RMB13 billion ($1.9 billion) to help them weather the slowdown.
The late Sir Adam Thomson knew a thing or two about the aviation industry. He was the founder of British Caledonian, the airline British Airways bought shortly after its privatisation in 1987.
‘A recession,’ he once explained, ‘is when you have to tighten your belt. Depression is when you have no belt to tighten. When you’ve lost your trousers – you’re in the airline business.’
The Daily Telegraph which recalled that excellent quotation points out the world’s major airlines racked up combined losses of as much as $8.5bn last year far worse than the $5bn previously predicted.