U.S. airlines are retreating from Mainland China, realizing the great Chinese aviation gold mine may actually be fool’s gold.
To be sure, there is money to be made…a lot of it. But U.S. airlines are increasingly finding frustrating yields and disappointing growth in Chinese markets. As oil prices continue to rise, some routes, even flagship routes, are becoming untenable.
In the Smisek era at United Airlines, dreams of solidifying dominance in secondary Chinese markets spurred new service from San Francisco to Hangzhou, Chengdu, and Xi’an. Today, only Chengdu remains: United was simply unable to command the premium needed to sustain these direct flights.
But the Chinese problem for U.S. airlines is going beyond secondary cities.
American Airlines announced it will eliminate service to both Beijing and Shanghai from Chicago. Both flights will cease in October. Vasu Raja, vice president of network and schedule, called those routes “colossal loss leaders” for many years.
Meanwhile, Hawaiian Airlines also announced this week it is ending service to Beijing. Brian Sumers of Skift points out three reasons why this route, started in 2014, did not work for Hawaiian. First, most Chinese tourists prefer to stay within Asia when seeking out warm/beach destiations. Second, not many people speak Mandarin in Honolulu. Lastly, visas to the USA remain difficult to obtain for Chinese citizens.
I think that last point is important. One reason airlines have not seen such stunning success in the Chinese market is simply a byproduct of the difficulty of obtaining a visa to the USA.
The next question will be if Delta or United step in to take over the Beijing and Shanghai slots that American is now abandoning. While it would not surprise me, it might be wisest for all three legacies simply to let those slots sit dormant and funnel passengers onto remaining flights.
image: Grant Wickes / Wikimedia Commons