Airlines Chinese Airline Sector: Recovery tracker: Data perspective on market

The YoY decline in China's domestic air passenger numbers narrowed to 27% in July, from 35% in June and 47% in May. We think domestic traffic will continue to recover.

07 Aug 2020

Monthly air passenger numbers, YoY growth in China

Source: CAAC, Flight Master, UBS-S estimates

The line chart shows the growth of China's monthly air passengers from January 2018 through present, with estimates from now until November 2020

We expect traffic to continue to recover

We forecast China air travel demand to decline 35% YoY in 2020, reflecting the recovering domestic business and lacklustre international demand. This is better than IATA's estimate of a 55% YoY decline in global demand. We are encouraged by the continued recovery in China's air traffic in June and July, despite the secondary outbreaks in Beijing and Xinjiang. We expect the recovery to continue, driven by improving leisure travel demand from this summer, and a return of business demand after the secondary outbreak ends. 

Domestic air passenger traffic recovery continues

According to Flight Master, domestic air passenger numbers continued to recover, with a 27% YoY decline in July, after a 35% YoY decline in June. We attribute this to good control of the secondary outbreak in China, and more leisure travel demand in summer. Our tracking data shows the recovery is not only from business travel, but also tourism.

The impact of the secondary outbreak of COVID-19

We think the impact of the secondary outbreak depends on the number of the infected cases and the time needed to control the outbreak. The secondary outbreak in Beijing started on 11 June 2020, and it took 25 days to get the number of new confirmed cases back to zero, with 300+ confirmed cases during this period. Air passenger traffic troughed for two weeks (>90% YoY decline), and it took one and a half months to recover to the level before the secondary outbreak. We view potential secondary outbreaks as a downside risk but do not think they would reverse the domestic recovery given a quick response that could bring them under control.

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