Chinese state-owned airlines join price war in national mission

AllAfrica

20-06-2025

Chinese state-owned airlines have joined an intensifying price war, although unwillingly, amid challenges including local passengers' weakening spending power and rising market competition.
Air China, Southern Airlines and Eastern Airlines have been facing huge losses for five years since the Covid-19 pandemic broke out in early 2020.
Although China canceled all epidemic rules in early 2023, the three firms still recorded net losses in the past two years. They carried more passengers last year than in 2023, but had to lower air ticket prices due to rising competition from budget airlines and China State Railway Group, the country's high-speed train operator.
The price war is intensifying this year. Many Chinese airlines now offer domestic round-trip tickets at about 200 to 300 yuan (US$28 to US$42), as it is a low season before the summer holidays.
Round-trip tickets to remote cities are 80- 90% off, while those to key cities like Beijing are 40-50% off. Budget airlines such as Spring Airlines and Juneyao Air are growing fast in this price war.
Huaqiu.com, a unit of the People's Daily, reported in late May that Chinese airlines have started offering significant discounts to customers. For example, a ticket for a round trip between Chengdu and Kunming costs only 222 yuan, and between Chengdu and Haikou, it costs 237 yuan. Kunming and Haikou are famous for their natural attractions.
A Chongqing-based writer said air tickets departing from Chengdu are about 70% off on average from the high season. He said a Beijing-Sanya round trip ticket is only 230 yuan, down from 2,000 yuan during the Spring Festival in late January. He said the competition intensifies as Chinese airlines keep opening new routes this year.
Citing Civil Aviation Administration of China (CAAC) data, Xinhua reported in March that 38 airlines will open 640 new domestic flight routes this year, connecting key cities such as Chongqing, Changsha and Tianjin with tourism cities in Xinjiang, Inner Mongolia, Guizhou, Sichuan and Yunnan provinces.
The CAAC also allowed 193 local and foreign airlines to add 22,946 new international passenger and cargo flights per week in 2025, or 33% more than in the same period last year. These new routes cover 78 foreign countries, 57 along the Belt and Road.
'Do you think the three state-owned airlines don't want to make a profit?' a Shandong-based columnist called Xiao Song says in an article. 'They have their difficulties.'
'Despite losing money, some routes had to be launched for political reasons, such as those to Xinjiang and Tibet, and those to African and South American countries,' he said.
He added that budget airlines and state-owned airlines operate their businesses differently. For example: Spring Airlines targets low-cost tourists who travel to remote cities, while state-owned airlines mainly compete in key cities.
Juneyao Airlines offers one-day trips for businesspeople at prices lower than those of the high-speed railway.
Budget airlines mainly use Airbus A320, which can fly up to 12 hours per day, compared with state-owned airlines' 10 hours.
State-owned airlines deploy domestically some of their long-range Boeing 787 planes, which burn more fuel than narrow-body aircraft.
State-owned airlines operate less efficiently than private firms.
He said these are reasons why budget airlines can make a profit and pay their pilots 15,000 yuan per 90 flight hours, while state-owned airlines lose money and can only offer their pilots 10,000 yuan. He said state-owned airlines now realize these problems and try to provide more low-cost packages.
In 2024, the top seven Chinese airlines, including state-owned and private ones, recorded combined revenues of 587 billion yuan, up 13.6%. Spring Airlines was the most profitable, with a net profit of 2.27 billion yuan.
In fact, Air China, Eastern Airlines, and Southern Airlines successfully narrowed their net or before-tax losses last year from 2023. The number of passengers carried was 155 million (+23.8%) for Air China, 141 million (+21.6%) for Eastern Airlines, and 165 million (+16%) for Southern Airlines.
According to the CAAC, the total number of flight passengers grew 5.8% to 246.8 million in the first four months of 2025 compared with last year.
Currently, the central government does not intend to stop the price war or reduce competition in the airline industry.
'The decline in air ticket prices is good news for the tourism market as it can effectively boost the number of tourists and create growth for related industries such as hotels, catering, transportation and retail,' a Yunnan-based writer says in an article.
She thinks the trend will also help diversify the tourism market, as new and small tourism sites can emerge.
However, Hsieh Chin-ho, a Taiwanese commentator, said the falling prices of air tickets and hotels will worsen China's deflationary problem, which was caused by the burst of the country's property bubbles several years ago.
Hsieh said China's consumer price index (CPI) decreased by 0.1% year-on-year in May, and its producer price index (PPI) dropped by 3.3% year-on-year, showing weak domestic consumption.
He said a vicious cycle created by weakening consumption and falling property prices could further drag down the Chinese economy – resulting in a lost decade of slow or negative GDP growth, such as was experienced by Japan from the 1990s to the 2010s.
Read: China's fast-growing high-speed railway network faces reality