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Flyingsottsman
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How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 9:20 am

For the last 3 months, we have heard, talked and even speculated about the aviation industry all over the world, Virgin Australia looking for a buyer, Virgin Atlantic asking the Government for money, SAA nearly crippled and so on and so on, Services suspended, fleets grounded. How has COVID-19 affected the Chinese Airlines, how many of their fleets have been grounded, how many and what destinations by all their airlines that fly overseas have been suspended and which of the Chinese airlines will go broke through COVID-19 crisis?
 
jghealey
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 10:10 am

I'm sure their revenues have been hugely affected. But I doubt this is exactly a threat to their existence - with their essentially endless government support. And where other countries are providing privatised airlines state aid, the Chinese government actually owns most of the airlines (whether directly or indirectly), so the support will be greater and will be with fewer conditions.

Because of this, I'd say they're likely to fare better than most of the world's airlines. Indeed, I noticed the Chinese are launching a brand new airline despite the situation. Just stating the obvious really.

Also worth mentioning that they've been running quite a few cargo flights, and passenger numbers will obviously be on the up as the Chinese (and wider Asian) economy restarts.
Last edited by jghealey on Mon Jun 22, 2020 10:12 am, edited 3 times in total.
 
VSMUT
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 10:10 am

Flyingsottsman wrote:
and which of the Chinese airlines will go broke through COVID-19 crisis?


I suspect very few. Being a communist country, the state will be propping up most airlines. For the same reason, you can't draw direct parallels between the development in Chinese aviation and the rest of the world.
 
moa999
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 10:45 am

Think I'd read a few places that domestic capacity was back to 70% (at least before the recent Beijing outbreak). Obviously international cratered.

Remember China was down to under 15 new Covid cases a day at one point.

They are certainly in a better position than most and majority have central and regional government support.

HNA which owns a chunk of Hainan, a bit of Virgin Aus, and sold HK Express to Cathay in 2019 has been at risk for a while, but that doesn't mean Hainan is at risk.
 
MIflyer12
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 11:43 am

Flyingsottsman wrote:
which of the Chinese airlines will go broke through COVID-19 crisis?


You might think about what it means to 'go broke' here.

A carrier could go into liquidation. The national government, provincial governments, and their closely-affiliated banks don't want that to happen because it compromises their goals of regional development, and the building of a national air transport network.

A carrier could go into U.S. Chapter 11-style restructuring and be allowed to abandon its debts (and terminate leases, etc.) That just forces bad debts onto largely state-owned banks (and airports).

IMHO Chinese carriers will be allowed to borrow enough to sustain operations to avoid those undesirable outcomes.
 
gunnerman
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 12:54 pm

The China 3 have the same chance of going bust as the ME3: zero. These airlines are essential tools of the governments for growth, marketing and a variety of other reasons. It's as simple as that.
 
Aither
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 12:56 pm

Actually they will make more profits not flying international routes :)
I'm a bit exaggerating here of course but the bread & butter of the Chinese airlines has always been the domestic market and even it it's down say 30%, fuel costs are also down. Overall they will be hit hard but far less than other airlines.
As they better and faster recover it could actually be the opportunity for these carriers to expand more globally, maybe targeting more foreign travelers.

A big worry also is the US trade sanctions & flights rights to the US. I also believe these sanctions or trade limitations will not only come from the US as countries will be trying to recover their economies.
Never trust the obvious
 
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qf789
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 1:42 pm

Could we please just discuss the topic and keep it about aviation. For all non aviation related discussion including politics take it to non-aviation
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eamondzhang
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 11:10 pm

MIflyer12 wrote:
A carrier could go into U.S. Chapter 11-style restructuring and be allowed to abandon its debts (and terminate leases, etc.) That just forces bad debts onto largely state-owned banks (and airports).
.

I don't believe such thing (Ch.11 equivalent) exists in China. It's either survival or liquidation.

Michael
 
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Rajahdhani
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 11:20 pm

Considering the level of 'influence' that the government has with airlines, would now be a good time to hedge on low fuel costs? I mean, if the majority of the flying is going to be domestic, anyway - they're going to need to buy larger quantities in nation?

If I were one of the Chinese carriers, I would better appreciate lower fuel costs for the short-medium term, and few other large economies can be that directly 'influenced' by the government - and this is a decent option, not in addition to what other state aide is offered.

Add to that, boost local aircraft production (or, perhaps the introduction of other aircraft types, with a 'fuel rebate') taking aim at a way of at least lowering operating costs, even if (or especially within) the nation.
 
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Rajahdhani
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Re: How hard have the Chinese Airlines been hit

Mon Jun 22, 2020 11:22 pm

eamondzhang wrote:
MIflyer12 wrote:
A carrier could go into U.S. Chapter 11-style restructuring and be allowed to abandon its debts (and terminate leases, etc.) That just forces bad debts onto largely state-owned banks (and airports).
.

I don't believe such thing (Ch.11 equivalent) exists in China. It's either survival or liquidation.

Michael


That raises a decent point. Can anyone help with understanding how carriers within the Mainland, 'dissolve'?
 
MIflyer12
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Re: How hard have the Chinese Airlines been hit

Tue Jun 23, 2020 1:06 am

eamondzhang wrote:
MIflyer12 wrote:
A carrier could go into U.S. Chapter 11-style restructuring and be allowed to abandon its debts (and terminate leases, etc.) That just forces bad debts onto largely state-owned banks (and airports).
.

I don't believe such thing (Ch.11 equivalent) exists in China. It's either survival or liquidation.

Michael


I'm not a lawyer versed in Chinese law but I believe a restructuring of business debts is permitted under Enterprise Bankruptcy Law. See this from 2019.

http://restructuring.bakermckenzie.com/ ... r-2018.pdf
 
MIflyer12
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Re: How hard have the Chinese Airlines been hit

Tue Jun 23, 2020 1:11 am

Rajahdhani wrote:
That raises a decent point. Can anyone help with understanding how carriers within the Mainland, 'dissolve'?


In 2002 there was a series of government-directed mergers. https://www.cnn.com/2002/BUSINESS/asia/ ... ml?related

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