In the U.S. airlines have continued to fly even in the face of very limited demand, because that has been a condition of government bailouts. While there are far fewer flights – for instance down 80% or more in May, though American will operate about 40% of its flights in July – the CARES Act requires airlines to continue to fly to almost all of the places they flew before the pandemic (just less frequently).
The CARES Act also requires airlines to keep employees on their payroll through the end of September, without reducing rates of pay. Airlines have saved money, keeping more of the bailout funds, by limiting the number of hours employees work (or requiring unpaid days off) and by enticing people to take exit packages, with the threat of being fired effective October 1 if they don’t.
China is actually taking a similar – although more extreme – approach with its aviation industry. Airlines in China, where not owned by the government directly, are frequently owned by government-backed investment funds.
Although air travel in China was still down almost 70% in April, Chinese airlines are “running around 90% as much domestic capacity as they did a year ago and plan to step up to 96% next week.”
Loads remain poor, however. Airlines are deliberately rebuilding capacity in advance of demand, in part to make use of otherwise idle employees, industry managers said.
Chinese airlines, as state entities, cannot furlough workers because that would admit failure of the Communist Party. And at the province level, declines in employment would reduce political prospects for local leaders.
Update: Reader Steven Z. points to this article in Chinese which offers data consistent with what I’ve written about how much travel has returned to China but suggests that so far 57% – 66% of capacity has returned, suggesting a lower starting point for any ramp up in flying.
Gary, not gonna lie, your conclusion is such a stretch.
From a network planning perspective, variable costs are relatively low since most have been pre-committed. One could argue that increasing capacity would help maintain network structure and induce latent demand. And there is certainly nothing wrong with taking an aggressive approach to accelerate the economy
So if Chinese ghost flight as supporting the Communist Party, who exactly is being supported by the ghost flights in the United States? Its funny how people seen and rationalize supposedly tremendous distinctions between the command economies present in the US and China when they’re really so similar.
United States 2020
– uncontrolled pandemic as the government went from “masks don’t help” to “you must wear a face covering even just a T-shirt over your mouth”
– civil unrest in every major city — stores looted, including pharmacies serving sick patients; traffic blocked, so much for having sympathy for our essential workers who are now stuck in cars unable to make their essential deliveries, get to their essential jobs, or return home to their families
– reverse racism in the BLM movement — rampant pandering to Black communities at the expense of other minority community, drowning out awareness of non-Black issues like DACA or H1B issues giving Hispanic and Asian immigrant populations uncertainty of how long they can remain in the country
– irrational acceptance of to the Black communities’ cry that Black people are at risk of death by police misconduct when the statistics show Black people are orders of magnitude more at risk of death by intra-Black community violence
– belief that the Black community should be given handouts, whether in actual reparations (despite no living Black person having been enslaved) or by “affirmative action” which is the only explicit form of institutional, systemic racism in the country, has been outlawed in 8 states including California, but there are measures to bring it back
– god knows what else if the Minneapolis officers are acquitted which is pretty likely as the current charges are trumped up for political optics
China 2020
– civility
– widespread adoption of face masks from day 1
– low load factors on planes -> greater social distancing
– booming tech presence on the global stage, see e.g. Bytedance/TikTok
Gary, I think this piece is an example of confirmation bias to the extreme. I am not sure how one can take similar data and results then reach a conclusion that supports different theories. Let’s stick to things we understand, and that’s travel for business and leisure.
@Jason – methinks you would have been happier during Jim Crow America times
I think Jason wants authoritarian rule, as long as he is part of the authority.
Just because there is black on black violence doesn’t mean you should accept police killing black people for no reason. Police unions and some policemen are just out of control and need to be removed.
A list of crimes by the current politicians especially Trump would greatly exceed your list.
Always trying to deflect or change the topic since you have no solutions and want status quo.
@Jason
You do make very good points. The whole mask debacle has been flamed by the WHO which switches its recommendations every hour about whether wearing a mask helps stop the spread or not. CDC guidelines also have switched because the data about effectiveness is based on if people are wearing masks correctly. I see so many people wearing masks incorrectly it negates the benefit for them.
The BLM movement is very upsetting with its anti white racism. Many whites are killed by the police, including Justine Damond, a white Australian, who was killed by a Somali born cop in Minneapolis on her porch area. It took months for the cop to be indicted and arrested. So many whites and conservatives see the danger of a police state with the war on drugs and cops enforcing gun control. Cops themselves are hired by bureaucrats we regularly deride. Of course we are not comfortable with modern policing, the TSA, or the FBI. But then we have thugs running wild in our communities. We see looting and violence. It’s one big disaster. Police abuse of all people, black on white violence, and black on black violence (94% of blacks kill other blacks) are issues which need to be addressed. I just wished the anti white hate was dropped from the BLM platform. It calls for celebrating black pride, discriminating in favor of blacks in hiring and academic admissions. It calls for publicly supporting black owned businesses. But if anyone wanted to do the same for whites he or she will be denounced.
There really should be a lot of counter protests right now. Not just counter protesting the anti white racism but protesting Black on White Violence, protesting black on black violence, protesting in favor of school choice, protesting in favor of home schooling, protesting abuse of power by cops and federal agents, protesting the TSA, protesting gun control, protesting bureaucracy, protesting restrictions of religious freedom, protesting one sided censorship by large media utilities (google, Twitter, Facebook). None of the police abuse is going to end until we end the war on drugs though. Half of people are in prison for violating the rights of no one and making person decisions for themselves. All the police reforms in the world aren’t going to change the abuse of millions until police stop apprehending people for nonsense.
@Jason
Could not believe what I just read. China? Civility? When did that happen? Better review who and what China is all about from lying about the Virus to how they treat their own people. I guess you did not watch the video of them dragging out suspected COVID19 cases from their homes screaming. And what about the mobile execution squads or people like Gui Minghai ? Aggression in the South China Sea or threats to retake Taiwan by force? What about Hong Kong? Did you see what the Swedes did to the Chinese Ambassador after he threatened them?
People better wake up to what China is – a threat.
I think the headline is a stretch but I kind of like this sort of provocative piece.
I think it’s more likely that the ghost planes are serving communism writ large. Central planning requires and relies on quotas, because the primary feedback mechanism found in market economies (free floating prices affected by supply and demand) is absent. When demand conditions change quotas may be changed or they may not.
Google “Inside the most irrational environmental crime of the century” to read about how the collapse of many whale populations was the result of totally unrealistic soviet fishing tonnage quotas that were most easily met by killing whales.
The truly sad thing is that the quotas were for fishing tonnage, not for actually bring the fish back to port or delivering it to stores, so the vast majority of whales killed in the 1970s were just left to rot in the sea as grim testaments to the power of central planning.
@Jason
Chinese civility like when the CCP blamed Africans for COVID-19 and left them homeless in Guangzhou?
https://www.theguardian.com/commentisfree/2020/apr/25/coronavirus-exposed-china-history-racism-africans-guangzhou
GTFO wumao
It’s a stretch to say that government needs to keep airplanes flying all over the place to avoid losing face. They keep control by force, not by convincing people they are good for the country.
Good thing that would never happen in non-Communist US. The US trillion dollar bailouts are completely in line with free market principles.
I don’t get how “Chinese airlines, as state entities, cannot furlough workers because that would admit failure of the Communist Party” squares with “CARES Act also requires airlines to keep employees on their payroll through the end of September, without reducing rates of pay.”
Same action, but the first is interpreted as conniving and the second as caring.
Double standard much?
And worms like Tucker Carlson spread lies to protect Herr Trumpf
I go by the facts- the same article that states Chinese airline capacity is at 90 – 96% in June, also says “Domestic passenger load factors … For May, the average was 65.2%” So how bad is a load factor of 65%? Looking back at the US domestic market, load factors were 67.9% in 2002. So in a normal market, in a recession, with no government intervention, we had similar load factors.
Yes, China followed a policy of subsidizing full employment through the lockdown- but that seems to have been the rule this time around by most countries, and the US policy of mass layoffs coupled with unemployment payments the exception. We will see how the two models work out in the long run, but keeping employees in place seems like the path to faster recovery.
To me, running at 90-96% capacity seems a little high, but not crazy. Certainly with a 65%+ load factor, they are not “flying ghost planes”.
I give you two Pinocchios…