Fuel shocks, thin margins: why China’s airlines should ‘heed Spirit’s mistakes’
Demise of US budget carrier seen as a warning sign of how turbulent it could get for China’s airlines with fragile bottom lines
The sudden collapse of Spirit Airlines is serving as a stark warning for the global aviation industry, as China’s own carriers just struggled through a disappointing May Day holiday marred by surging fuel costs and an embrace of the nation’s high-speed rail network.
Hopes that the five-day “golden week” could provide a meaningful lift for airlines operating in China were dashed, as the US-Israel war with Iran, now in its third month, has caused fuel prices to nearly double.
While no Chinese carrier has been pushed to the brink as Spirit was, the US budget operator’s demise offers a cautionary lesson for a sector with fragile bottom lines, according to analysts.
Chinese holidaymakers largely opted for land travel over flying, with the nation’s railway network setting multiple records during the holiday period that commemorated China’s Labour Day and officially lasted from Friday to Tuesday.
During the eight-day holiday travel rush from April 29 through Wednesday, passenger trips operated by China’s railways totalled 159 million – a year-on-year increase of 5.2 per cent, according to the China State Railway Group.
In comparison, the Ministry of Transport said on Wednesday that China’s total civil aviation passenger volume was 10.54 million from Friday to Tuesday, with a daily average of 2.108 million, representing a year-on-year decrease of 5.74 per cent.
“Some ultra-low-cost carriers and full-service ones in either China or America operate on razor-thin margins,” warned a note from Shanghai-based aviation consultancy Airwefly on Wednesday. “Many may not withstand prolonged fuel-price shocks.