27 Jan Post-Covid-19 Recovery – Lessons from China
Since last December, the vaccination has started around the world, and the hope of reopening and recovery seems to be achievable shortly. People’s desire for travelling has been repressed in the endless lockdown and winter. Now, it is time for us to make a plan for the coming spring. What could the airlines prepare? Lessons may come from the recovery of the aviation industry in China.
Revival of the aviation industry in China
Due to the resolute action taken by the government and the cooperation with its people, the situation of Covid-19 in China was mitigated since April 2020. With the reopening of the country, its aviation industry started to back on track (see Figure 1). Regarding the traffic in January 2020 as the normal value, it took five months for the domestic flights to return the pre-pandemic level, however, the international side has not recovered yet.
Strict methods and uniform standards have been adopted countrywide since the onset of the pandemic in China in early 2020. Owing to this, the domestic travel restrictions have been lifted and the passenger flow has bounced back. However, due to the uncertain development of the plague overseas, the gates have been guarded strictly, which leads to the impossibility for Chinese travellers to go abroad. Therefore, sights are thrown to the domestic destinations which were seldom focused before the pandemic, which promotes the prosperity of the aviation market in tier-2, 3 and 4 cities in China (see Figure 2).
This route could be followed in other parts of the world (e.g. the EU and the ASEAN) if the regional pandemic control methods and standards are achieved and observed by its members. The “travel bubbles” between some areas are good examples, and it may be enlarged to a region-wide scale. The pause of the long-haul flight is an opportunity for the less-popular airports and destinations to promote themselves.
Discount packages bring new chances to airlines
The suspension of the flight has wrecked airlines around the world. Though the traffic in China has returned to a similar level with 2019, airlines are still scrambling. In June, China Eastern (together with Shanghai Airlines) launched a new discount package which allows passengers to fly on any of its routes on weekends until the end of 2020. It costs about 422 EUR and is limited to 100 thousand sets, which finally brought China Eastern over 40 million EUR cash.
Compared with the loss suffered in the earlier months, the income seems to be inadequate. However, it benefits the airlines in deeper perspectives. Firstly, it brings cash flow to airlines. Secondly, it raises the load factors and marginal revenue of the airlines. For example, the load factor on its Guangzhou-Shangri La route reached 90% in August which overpassed the 2019 value. Thirdly, it is proved to be a new effective way to promote the airlines’ Frequent Flyer Program (FFP).
Though the FFP was launched in China early in 1994, the direct sale of flight tickets and the relevant service has never been quite successful in China and the online travel agency (OTA) always took the larger part of the cake. Since the discount package could only be used via the airlines’ official website and the Apps, airlines managed to foster the passengers new consuming habit and to promote the auxiliary services including the hotel, car rental and travel services.
Following China Eastern’s success, other airlines in China launched similar products successively. As for the other areas in the world, such as the EU, with the bankruptcy of several airlines, survivors could consider the possibility to capture the market they left.
The Covid-19 has afflicted us for one year, and the flow of air transport has been slowed down. But it provides the government, airlines and airports with the time to consider the issues beyond the busy daily operations. It is also an opportunity to change the existing situation of the aviation industry. Although there seems to be a long distance to the recovery, the spring is coming.
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