What Does the Exit of European Airlines from the Chinese Market Mean for Air Cargo?

With airlines like Scandinavian Airlines (SAS), LOT Polish Airlines, Virgin Atlantic, and British Airways suspending flights, connections along the China-Europe route are weakening. This could affect passenger and cargo capacity between China and Europe, providing growth opportunities for Chinese airlines!

Recent exits from the Chinese market include Scandinavian Airlines and LOT Polish Airlines. According to SAS's website, it will stop flights from Copenhagen to Shanghai, with the last flight scheduled for November 7. Similarly, LOT will suspend flights from Warsaw to Beijing starting this winter, with the last flight from Warsaw on October 24 and the return flight from Beijing on October 25. Currently, SAS operates the Copenhagen to Shanghai route using the Airbus A350-900, while LOT uses the Boeing 787-8 for its Warsaw to Beijing route.

With these suspensions, SAS and LOT join Virgin Atlantic and British Airways, among other European airlines, in ceasing operations in China.

Earlier, Virgin Atlantic announced it would halt flights to Shanghai starting in October, with the last flight from London on October 25 and the return flight on October 26. Virgin Atlantic only operated flights between London and Shanghai using the Boeing 787-9. British Airways has also suspended flights from London to Beijing, announcing that services to the Chinese capital would end on October 26, at least until November 2025.

According to data from Cirium, Finnair has reduced its seat capacity to China by 90% compared to 2019, now only flying the Airbus A350-900 to Shanghai. Previously, Finnair operated flights to Beijing, Guangzhou, Xi'an, Chongqing, and Nanjing.

The closure of Russian airspace due to the Ukraine war is a major reason for European airlines' withdrawal from the Chinese market. With Russia banning European airlines from using its airspace, they are forced to take longer, more expensive routes. In contrast, Russia allows Chinese airlines to fly through its airspace, providing a significant advantage to Chinese carriers. Chinese airlines can fly to Europe and beyond more directly and cost-effectively, reducing flight times and operational costs.

This suspension of flights could lead to a significant decline in revenue for European airlines and have a major impact on air cargo volumes between Europe and China.

Data from the European Commission shows that China is the EU's second-largest trading partner, following the U.S., with bilateral trade totaling €739 billion in 2023. China is also the EU's largest import partner and the third-largest export partner. In 2023, the EU exported €223.6 billion to China and imported €515.9 billion from China, reflecting a year-on-year decline of 3.1% and 18%, respectively.

Airlines like Virgin Atlantic, British Airways, Finnair, Scandinavian Airlines, and LOT Polish Airlines are key operators of cargo in the belly holds of passenger aircraft, which provide reasonable cargo capacity. In the context of increasing demand for air cargo services, this belly hold capacity is particularly important.

According to a recent report by Xeneta, in August, China's e-commerce export trade value reached its second-highest historical level, only slightly below the all-time high of $8.7 billion set in December 2023. E-commerce goods continue to drive trade volume growth, and these passenger airlines contribute by utilizing belly hold space to carry the increasing e-commerce exports from China.

Data from World ACD further highlights this trend. Compared to the first half of 2023, the total outbound cargo volume from mainland China and Hong Kong grew by 24% in the first half of 2024, following a year-on-year increase of 12% in 2023.

Camilo Garcia Cervera, Chief Sales and Marketing Officer at IAG Cargo, stated, “The nature of the cargo we transport from China is changing. Goods from China typically include automotive parts, technology products, and e-commerce items; when entering China, we often transport perishable goods, pharmaceuticals, and luxury fashion items to meet the growing demand for high-quality imported products.”

Regarding the suspension of flights, a Virgin Atlantic spokesperson said, “After careful consideration, we made the difficult decision to suspend flights from London Heathrow to Shanghai. We have proudly served this Asian hub city since 1999. Since our first landing in Shanghai 25 years ago, Virgin Atlantic has provided important connections between the UK and Shanghai and supported the global supply chain through our cargo operations. However, the significant challenges and complexities facing this route have prompted us to make this business decision.”

The inability to fly over Russian airspace has lengthened flight times and increased operational costs. The flight time from London Heathrow to Shanghai Pudong International Airport has increased by about an hour, while the return flight takes about two hours longer. This added flight time requires additional aircraft and crew resources, further driving up operational costs.

The exit of European airlines from the Chinese market will have a significant impact on air cargo capacity between Europe and China, potentially leading to a gradual loss of market share for European airlines and providing growth opportunities for Chinese carriers. Chinese air cargo companies and freight forwarders need to seize this opportunity, reconfigure networks, and increase dedicated freighter services to make up for the lost belly hold capacity.

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WeChat Public Account: Cross-border E-commerce Logistics Baixiaosheng