The Sino – European Air War: Why Chinese airlines displace Europeans from Asia

In addition to the war of trade between the West (US, ) and China another war has started especially after the conflict erupted in Ukraine: The war of… airs and actually the war between European and Chinese, with China winning so far. Flights to Asia are increasingly a problem for airlines in the EU. This is because since the outbreak of the war in Ukraine, they are forced to fly around Russia, which increases flight times and makes connections increasingly expensive. State Chinese airlines, on the other hand, continue to fly the old route – and extend their services to Europe massively. This is confirmed by elements of the Cirium service provider, which were analysed by Handelsblatt. Chinese airlines increased their capacity between European and Asian cities by 30% in August 2024 compared to 2019. This includes Frankfurt, Munich, London and Paris on one side and Beijing and Shanghai on the other. At the same time, Lufthansa, British Airways and Air France reduced their capacity by almost 40%. Prices are now falling due to the increasing number of Chinese seats on the routes. British Airways therefore cancels the route from London to Beijing from October, while Virgin Atlantic cancels the connection with Shanghai. Lufthansa, on the other hand, is based on politics. The company has been protesting for some time that increasing charges and demands, for example in relation to climate targets, distort competition. Furthermore, there is now increasing competition from China, the group warns: “Politicians in Germany and Europe must find new industrial policy responses”. Traffic in Asia is important for Lufthansa Flights to Asia were a great source of hope for the directors of European airlines such as Lufthansa. It is true that countries like China reopened their borders very late after the pandemic. However, Lufthansa’s CEO, Carsten Sports (Carsten Spohr) predicted that the replacement phenomenon would then be as large as before on the routes to North America. Business activity in Asia is important for Lufthansa. In the pre-crisis year 2019, nearly a quarter of the seating capacity was sold in this traffic area. Asia contributed about 19% of passenger revenue. Everything turned out differently than Sports expected: first Russia invaded Ukraine and made it impossible to fly over Russia for western providers. Then rivals from China managed to grow more. European airlines can hardly compete. The direct link between Paris or London and Shanghai via Russia is approximately 9,300 km long. The route through Turkey and Central Asia covers 10,400 km. Experts estimate that only detours in Lufthansa bind 30% more fleet and staff. This adds the highest fuel costs. In the short term, these detours could become financially tolerated, explains a company executive. But the war has continued for two and a half years. “In Asia, we have the highest growth in the industry, almost 28%, driven by the major Chinese airlines,” said Michael Niggemann, Director of Human Resources and temporarily responsible for the Group’s finances, a few weeks ago when presenting the data for the second quarter. However, passenger growth is offset by lower revenues: With a drop of nearly ten percent in the second quarter, average revenues in Asia have been under greater pressure than any other traffic area. A look at the details shows how strongly Air China, China Eastern and China Southern are pushing towards Europe. According to Cirium, they are currently selling 41% more seats on the route between London and Beijing than in the same period of 2019. Chinese competition has major plans Apart from Air China, China Southern Airlines, which did not yet have the specific route on its 2019 schedule, is now flying here. China Eastern flights to Shanghai are also new to the London program. British Airways’ decision at present to stop flights to Beijing for economic reasons shows how great the financial pressure on these routes is. When the connection reopened last year after a three-year break, the administration was still talking about one of the most important connections. It is unlikely that the pressure will decrease. Chinese competition has big plans. China Eastern wants to become a world-class airline, says management as its strategic goal in the latest annual report. To this end, partnerships with Delta, Air France and KLM within the Skyteam alliance are to be strengthened and a ‘golden aviation triangle’ will be created, linking Asia, North America and Europe. Air China also mentions a global-class air group. “Air China will continue to focus on the development of long-distance routes in Europe, America and Australia,” said Luo Yong, the general marketing director of Air China recently. Air China and Lufthansa are partners and cooperate in areas such as network design and sales. This helps the German company be present in China. However, this does not change excess capacity. There are various reasons for hunger for development in Chinese air transport. Firstly, the Beijing government wants to attract more tourists to the country again. After the pandemic broke out, the border was closed for a long time. After that, only those who had gone through lengthy visa procedures were allowed to enter the country. Now the state is tempting the citizens of certain European countries, including Germany, with visa-free entry for up to 15 days. As of this month, visas for longer periods can be requested electronically, which is expected to make travel to China even easier. Secondly, the Chinese airlines have not reduced flights during the pandemic. In order to keep aircraft in the air, even large-scale aircraft have developed inside the country. Unlike their competitors in the West, suppliers in China had no capacity and staff shortages, which severely restricted businesses during the pandemic. That is why they can now send their aircraft back on international routes. Meanwhile, it is not only the major hubs from which Lufthansa, Air France and British Airways perform their international routes affected by the intense expansion of services. More and more smaller airports from China are being served. For example, China Eastern added to its schedule the route from Shanghai to Marseille a few weeks ago. Venice is also included in the programme. The company also flies to Budapest from Guangzhou. Opponents from the Far East also have their eyes on Germany. An air traffic agreement regulates the number of passenger and freight flights allowed each week between Germany and China. Until recently, up to 55 passenger flights were agreed and up to 38 cargo flights per week. Although Lufthansa does not use this figure because of intense competition, it does everything it can from China. According to Cirium, Air China and China Eastern Airlines have returned to the pre-crisis levels of 2019 on the routes to Shanghai and even offer more seats to Beijing than in 2019. They’d like to fly even more. In March, the Chinese side called for passenger capacity to increase, said a spokesman for the Ministry of Transport. In return, the German side wanted more freight connections with China. Ministry of Transport puts brakes on China’s expansion effort According to the Ministry of Transport, China has now received four additional flights per week in the summer of next year and four more in the following fall. Experts in the industry say that these are significantly fewer flights than they hoped. German providers received 17 additional cargo flights. The ministry had in mind the competitive situation and, in particular, the competitive advantages of Chinese airlines, said a representative: “For this reason, we made sure that the increase in passenger flights is moderate and will only take place gradually next year”. The Ministry of Transport’s reluctance is probably also due to Lufthansa’s pressures. “European airlines are in extremely unequal competition with China, as well as with the airlines of the Persian Gulf and Bosporus,” complaints a representative of Lufthansa. All airlines from these countries will benefit from low installation costs, low social standards and high government investment in the aviation sector. The situation is reminiscent of the European car industry. It also feels the effects of competition from Chinese electric car manufacturers, some of which are subsidised by the State. The industry therefore wants to relax the ban on internal combustion engines. Lufthansa introduces new environmental charge The pressure exerted on Lufthansa, Air France and British Airways is likely to rise again from the following year. According to the EU Commission plans, they should then add a small amount of very expensive synthetic air fuel (SAF) to their air fuel. This exerts further pressure on the profitability of the routes. And it is an advantage for non-European competition. When Emirates, Qatar Airways or Turkish Airways carry passengers from Germany to Asia through their own nodes, they do not need to refuel with SAF for the route to Asia from Dubai, Doha or Istanbul. Lufthansa wants to pass on the additional costs to its own customers and already charges an environmental fee for flights made since the beginning of 2025. This could partly offset the additional costs. However, the additional costs could also ensure that certain customers would turn to competition.