Shanghai-based Delta partner China Eastern is back to 94% of prior year domestic capacity. They’re running a “Fly as you wish” deal which for $475 offers unlimited weekend flights. They report selling over 100,000 passes.
Other Chinese airlines have returned to flying nearly as much as before the pandemic. But that’s not because travel demand has returned, and indeed new coronavirus cases have grown in China – and there’s real government risk that flights could be cancelled on a blanket basis in and out of certain airports.
In the U.S. an incremental coach passenger taking a seat that would have flown empty might cost an airline $30 roundtrip or less. Since airlines are flying anyway – often with few passengers – the cost of carrying additional people is very low.
So at least 8 Chinese airlines are offering ‘all you can fly’ deals. Just today China Southern, part-owned by American Airlines and Qatar Airways, introduced all you can fly.
At least eight of China’s dozens of airlines have introduced similar deals since June, often priced around $500 for in some cases unlimited flights. Industry watchers say the packages have been a shot in the arm, with costs offset by otherwise empty seats being filled in a country where daily flights last month recovered to 80% of pre-coronavirus levels.
China Eastern Boeing 737
The challenge for airlines of course is that price largely isn’t the binding constraint on travel. Discounting tends to lead to share shift (passengers who would fly choosing one airline over another) rather than stimulating demand. I would have expected prices would have to go negative before putting enough passengers in the air to fill planes – airlines would have to pay customers. People are staying home because of uncertainty and perceived risk. However China Eastern does say they’ve managed 75% weekend load factors where the marginal cost of a flight is just taxes for so many people.
China Southern “Fly Happily” offer “allows buyers to use passes for as many flights as they wish for destinations across the country from Aug. 26 to Jan. 6 for 3,699 yuan ($529.03).” It’s more expensive but not limited to weekend flying, and requires payment of ~ US$7 in taxes per flight. Hainan Airlines has a $385 deal with unlimited flying to and from Hainan province.
With the federal government in the U.S. picking up labor costs through September 30, American Airlines says it breaks even at 25% load factor, anything over that is gravy. Chinese airlines are in a similar or even more advantageous position since even when they’re nominally private they’re generally substantially owned by government investment funds, and run by politically well-connected management.
Chinese hotels, by the way, are half empty, too with Beijing hotels two-thirds empty. Marriott in India has temporarily pivoted to restaurant delivery and away from lodging. In August its Chinese hotels will offer “the chance to eat a month’s worth of buffet breakfasts in any of its 146 China hotels for” US$84.