As China’s economy began to recover from coronavirus-induced stay-at-home orders in April, Victor Li took to the sky again. The 31-year-old investment manager, who used to fly about 150 times a year, has flown from his home in Beijing to Shanghai four times since lockdowns were lifted and recently found himself on a local flight that was about 90% full.
But while Li’s happy to be traveling again, he still can’t fly to Hong Kong for work, which he typically does around 10 times a year. He’s also missing quick getaways to Southeast Asian beaches, as well as holidays farther afield. Li’s experience sums up the predicament of China’s aviation market and provides a glimpse of what’s likely to happen in other countries as well. While domestic flights have rebounded, the busy concourses don’t extend to the international terminals. And that portends a long and slow recovery for airlines, the refiners who produce jet fuel and, in turn, oil prices.
Jet fuel makes up about one-tenth of the fuels that come from oil
Source: U.S. Energy Information Administration
What the world’s largest national aviation market is experiencing is a warning sign for other countries emerging from lockdowns. While China’s domestic flight capacity on main routes has already recovered to within 7% of year-earlier levels, international capacity is still down by 95%, according to Jefferies Group analyst Andrew Lee.
“The psychological hesitation of consumers and slow adoption of aviation industry policies to contain Covid-19 will be the biggest obstacles,” said Matthew Chew, associate director at energy consultancy IHS Markit. “Aviation leisure travel is by far the largest discretionary sector for consumers and will be severely hindered as the globe recovers from a recession.”