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Mia Nurmamat

China’s airlines are stuck in a difficult paradox, according to a new industry report: while their passenger numbers have risen, they are struggling to secure profits as competition intensifies on the most common routes and a world-leading high-speed rail network offers an appealing alternative for many of the country’s travellers.
In its report, Brazilian planemaker Embraer said that passenger volumes have surged past pre-pandemic levels – putting the government’s official goal of 1.5 billion annual travellers by 2035 firmly within sight – the industry remains stuck in a structural trap of overcapacity and fare dilution.
The report said Chinese carriers remain heavily focused on already saturated trunk routes, with over 65 per cent of flights operating on high-density corridors that have more than 800 daily passengers.
In addition, flights are at almost 76 per cent of capacity as defined by domestic available seat kilometres (ASK), mostly on routes served by three or more competitors.
“The result is a market defined by frequency wars, pricing pressure and diminishing marginal returns,” Embraer said.
Fleet composition is also compounding the problem. More than 80 per cent of China’s narrowbody jets are optimised for high-capacity and short to medium-haul operations, leaving lower-density markets underserved.
High-speed rail has added another structural headwind. The report said the rapid expansion of China’s railway network has fundamentally reshaped domestic travel patterns, pushing airlines into even fiercer competition along their remaining profitable corridors.
“On many city pairs under 1,000km (621 miles), rail offers faster downtown-to-downtown travel, lower fares and in some cases, higher frequency, eroding the pricing power of airlines,” it said.


Referencing the route from Guangzhou to Wuhan – capital of the central province of Hubei – as a “classic, painful example”, the Brazilian planemaker said yields on the previously popular itinerary dropped by “nearly 40 per cent” after high-speed rail service between the cities began in 2009, and “have remained depressed ever since”.
Pricing data suggests the pressure is intensifying. In its report, Embraer said the average domestic ticket price fell from 848.6 yuan (US$120) in the first quarter of 2024 to 766.9 yuan (US$108) in the first quarter of 2025 – a 9.6 per cent drop researchers projected would reduce margins by 8.35 percentage points.
The report also noted that domestic airfares have consistently risen more slowly than the consumer price index (CPI) over the past decade, meaning airlines have effectively been subsidising travel by absorbing higher operating costs.
“This reinforces the conclusion: lowering fares to stimulate demand and fill seats does not compensate for the revenue dilution it creates,” Embraer said.
To break the cycle, it urged carriers to expand into underserved domestic markets, especially in China’s third- and fourth-tier cities where urbanisation and regional growth were generating untapped demand.
It identified 797 city pairs that lacked high-speed rail links, took more than 4.5 hours to travel between by rail or presently had no direct flights. Of these, 185 pairs could immediately support new routes with at least three weekly trips, which could generate 9.04 million passengers in 2025.
The report also recommended building out short-haul international networks, especially from regional capitals like Chengdu, Wuhan, Nanning and Kunming to destinations around Asia.
Embraer added that airlines would need to deploy more 100- to 150-seat narrowbody aircraft and regional jets with fewer than 100 seats to lower operating costs and restore profitability.
Last year, China’s civil aviation industry turned a profit for the first time since 2020. The sector reduced its losses by 20.6 billion yuan (US$2.8 billion) from the previous year and recorded a 25 per cent increase in total traffic, according to the Civil Aviation Administration of China.


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Flight loads have surpassed pre-pandemic levels on high-density routes, but China’s carriers are still struggling to balance their books


Flight loads have surpassed pre-pandemic levels on high-density routes, but China’s carriers are still struggling to balance their books.


Chinese airlines dogfight for profits as route competition, railways soak up revenue

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Flight loads have surpassed pre-pandemic levels on high-density routes, but China’s carriers are still struggling to balance their books

Flight loads have surpassed pre-pandemic levels on high-density routes, but China’s carriers are still struggling to balance their books