July 6, 2022
Chinese Government to Subsidize Airlines
Airlines Industry

Chinese Government to Subsidize Airlines

DALLAS – The Chinese government will subsidize airlines from May 21 to July 20 to stave off the financial fallout of the pandemic and the increase in oil prices.

The country’s Ministry of Finance and the Civil Aviation Administration of China (CAAC) announced that the money is granted to any Chinese airline operating less than 4,500 flights per week and with load factors lower than 75%. Additionally, subsidized flights cannot be already profitable for the airline.

The maximum grant is worth US$3,570 per hour of flight, which is equal to 24,000 yuan, according to the ministry’s website. However, the central government does not cover all the subsidies, taking charge of 65, 70, or 80% of the grants depending on the region. Local authorities are to provide the rest of the money.

While major airlines operate too many flights to get subsidies, smaller carriers such as Hainan Airlines (HU) can benefit from them. Photo: Alberto Cucini/Airways

Challenging Times for Chinese Airlines

Many airlines in China are struggling to recover from the COVID pandemic, and the industry does not expect the situation to get better in the coming weeks. Indeed, many strict confinements around Shangai restrain passengers from traveling.

China Eastern (MU), an airline based at Shangai International airport (PVG), told Reuters its passenger numbers in April fell by 90.7% compared to 2021. PVG airport also said the passenger numbers are down 98.9% during the same period.

However, due to the 4,500 weekly flights rule, major airlines such as MU, China Southern (CZ), or Air China (CA) will not be able to get those subsidies, except if they cancel an important number of flights. According to fugures from airlinedata.com, MU has over 15,800 flights scheduled next week.

In 2021, the Chinese aviation industry lost over US$12.5bn last year, compared to a US$15.3bn loss in 2020. With these subsidies, the Chinese government hopes to keep the industry running and increase confidence in its growth.

Featured image: MU is impacted a lot by the recent COVID restrictions. Photo: Nick Sheeder/Airways

Aviation enthusiast and private pilot student, I am fascinated by the aviation industry.

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