Market Developments on Chinese International Air Passenger Markets in Light of COVID-19 Policy Measures

Abstract

The world’s governments imposed a plethora of restrictions and quarantine rules to prevent the rapid spread of COVID-19. China was chosen for this study as it was the first market to be impacted. The overall aim of this paper was to analyse international air travel to and from China since the start of COVID-19 and to assess the impact of policy initiatives on seat capacity during this time. The key findings are that implementation of the so called Five one policy in March 2020 was associated with an almost immediate reduction in seat capacity on China to the rest of the world, partially suppressing the more typical impact of underlying GDP and air fares on capacity. It was further found that Chinese international gateways, as airports with substantial proportions of international and connecting traffic, remain the most distressed. Long haul international traffic and revenues from European and North American destinations all experienced unprecedented and sharp reductions. Traffic and revenues from other Asian markets was even more sporadic. Alarmingly, the study extracted that revenues from premium classes were deteriorating much faster than economy class, which is of imminent concern for long-haul carriers reliant on premium traffic coming into the pandemic.

Full text

Sustainability 2023, 15, 1525. https://doi.org/10.3390/su15021525 www.mdpi.com/journal/sustainability
Article
Market Developments on Chinese International Air Passenger
Markets in Light of COVID-19 Policy Measures
Anne Graham 1, David Warnock-Smith 2, John F. O’Connell 3, Marina Efthymiou 4,* and Xingwu Zheng 5
1 School of Architecture and Cities, University of Westminster, 35 Marylebone Road, London NW1 5LS, UK
2 School of Aviation and Security, Buckinghamshire New University, Queen Alexandra Road,
High Wycombe HP11 2JZ, UK
3 Centre of Aviation Research, School of Hospitality and Tourism Management, University of Surrey,
Stag Hill, University Campus, Guilford GU2 7XH, UK
4 DCU Business School, Dublin City University, 9 Dublin, Ireland
5 College of Economics and Management, Civil Aviation University of China, Tianjin 300300, China
* Correspondence: marina.efthymiou@dcu.ie
Abstract: The world’s governments imposed a plethora of restrictions and quarantine rules to pre-
vent the rapid spread of COVID-19. China was chosen for this study as it was the first market to be
impacted. The overall aim of this paper was to analyse international air travel to and from China
since the start of COVID-19 and to assess the impact of policy initiatives on seat capacity during this
time. The key findings are that implementation of the so called Five one policy in March 2020 was
associated with an almost immediate reduction in seat capacity on China to the rest of the world,
partially suppressing the more typical impact of underlying GDP and air fares on capacity. It was
further found that Chinese international gateways, as airports with substantial proportions of inter-
national and connecting traffic, remain the most distressed. Long haul international traffic and rev-
enues from European and North American destinations all experienced unprecedented and sharp
reductions. Traffic and revenues from other Asian markets was even more sporadic. Alarmingly,
the study extracted that revenues from premium classes were deteriorating much faster than econ-
omy class, which is of imminent concern for long-haul carriers reliant on premium traffic coming
into the pandemic.
Keywords: Chinese aviation market; COVID-19; aviation policy; transport policy;
impact on aviation
1. Introduction
Sustainable aviation is based on three pillars, i.e., social, environmental, and eco-
nomic. The economic pillar of sustainable aviation has been a topic of scholarly discourse,
especially during times of external shocks. Air transport has exhibited little resistance to
external shocks but significant resilience [1]. The COVID-19 pandemic is the first infec-
tious disease and external shock that has been accompanied by such an extensive reaction.
By 11 March 2020, the World Health Organization (WHO) declared COVID-19 as a pan-
demic and as of 13 October 2021 there was 238,229,951 confirmed cases of COVID-19, and
4,859,277 deaths. Travel restrictions, lockdowns and significant changes to day-to-day life
were implemented to contain the virus [2]. As of 10 October 2021, a total of 6,364,021,792
vaccine doses were administered worldwide [3]. Airports and airlines reacted to the pan-
demic by ceasing many operations for months due to low demand and imposed re-
strictions. While the pandemic benefitted cargo operations due to an increase in e-com-
merce, passenger traffic decreased dramatically, partly due to the reluctance of people to
travel during the global pandemic [4].
Citation: Graham, A.;
Warnock-Smith, D.; O’Connell, J.F.;
Efthymiou, M.; Zheng, X. Market
Developments on Chinese
International Air Passenger Markets
in Light of COVID-19 Policy
Measures. Sustainability 2023, 15,
1525. https://doi.org/10.3390/
su15021525
Academic Editor: Lynnette Dray
Received: 21 November 2022
Revised: 20 December 2022
Accepted: 21 December 2022
Published: 12 January 2023
Copyright: © 2023 by the authors. Li-
censee MDPI, Basel, Switzerland.
This article is an open access article
distributed under the terms and con-
ditions of the Creative Commons At-
tribution (CC BY) license (https://cre-
ativecommons.org/licenses/by/4.0/).

Sustainability 2023, 15, 1525 2 of 24
The aviation industry changed significantly as documented by many authors. For
example, Li et al. assessed the spatiotemporal variations in global air transport networks
due to COVID-19 [5] whilst Andreana et al. examined the impact on air transport at the
macro-regional level [6]. Sun et al. found that over 110 papers had been published in just
2020 about air transport and COVID-19, categorising these in terms of analyses of global
air transport systems, the effects on passenger-centric flight experiences, and broader
long-term impacts [7].
Chinese aviation is the best example to showcase how the aviation industry has
changed.. Since economic reform and the country’s opening up in the 1970s, it has expe-
rienced a dramatic growth rate but was also the first market to be affected by the 2020
pandemic outbreak. As a result, the Chinese aviation market and COVID-19 has been ex-
amined by a number of scholars. Zhang and Tong (2021) examined the economic impacts
of traffic consumption during the pandemic in China that can be explained by objective
conditions and subjective factors [8]. Zhang et al. examined changes in airline passenger
travel behaviour [9] as did Zhang et al. [10]. Warnock-Smith et al. (2021) conducted a dis-
aggregated airline/airport analysis of Chinese aviation markets and Cui et al. (2021) ana-
lysed the COVID-19 pandemic shocks to the Chinese transport sectors [11]. Li et al. (2022)
looked specifically at the Chinese domestic market [12].
Policy measures related to COVID-19 have also been studied in the aviation litera-
ture. Zhang et al. investigated the effects of policy measures in Australia, Canada, Japan,
New Zealand, the UK, and the US, but with little emphasis on air transport related poli-
cies, whereas Kim and Sohn looked at the policies in the Korean aviation market [13].
Abate et al. looked into government support for airlines [14]. Zhu et al. analysed public
policy in reaction to COVID-19 [15], whereas Dube et al. looked at recovery prospects [16].
Regarding China specifically, Hou et al. covered airport slot re-allocation and subsidy
policy in China [17]. Li et al. studied the impact of direct flight suspension and complete
entry suspension policies on international connectivity [18]. Czerny et al. provided a pre-
liminary review of China’s market recovery and government policy [19]. Meng et al. com-
pared the impact of COVID-19 control policies in China with the US and Singapore [20]
whilst Sun et al. made comparison between China and Europe and US [21].
The paper contributes and adds significant value to this discussion by firstly estimat-
ing the impact of China’s overriding Five one policy on international seat capacity and
secondly by providing longitudinal disaggregated analysis of the Chinese aviation market
since COVID-19 started by considering variation in airline seats, average fares, passenger
numbers and revenues within different airline classes across individual airlines, routes
and airports serving Chinese international markets. This paper specifically seeks to ad-
dress the following research objectives: To statistically estimate the impact of the Chinese
Five one policy on international seat capacity to and from China; To evaluate changes in
traffic dynamics on international markets from China by airline, route and airport; and to
uncover how premium class revenues have performed in contrast to economy revenues
on Chinese international markets.
One of the notable developments since COVID-19 is that the Chinese domestic mar-
ket has shown some very clear signs of recovery, whereas the international market is still
very much suppressed. Hence the focus of this paper is predominantly on international
air services, as this is where much of the uncertainty still lies. These also tend to be more
significant regarding policy implications, as it is international air travel that has been most
affected by the complex web of travel restrictions and recovery initiatives introduced by
numerous governments.
The remainder of this paper is organized as follows. In Section 2, with the literature
review, we elaborate on policy measures related to international passenger entry and do-
mestic travel and those focused on aviation recovery, and then detail the specific policy
measures taken in China. Section 3 explains the method and data used for our analysis.
The main results and discussion are presented in Section 4, and finally, Section 5 provides
the conclusions, recommendations and implications of our study.

Sustainability 2023, 15, 1525 3 of 24
2. Literature Review
Airports worldwide experienced an estimated loss of approximately 64.6% of pas-
senger traffic and 66.3% or over USD 125 billion airport revenues in 2020 compared to
2019. Similarly, airlines noted a 65.9% decline in revenue passenger kilometres (RPKs) in
2020 compared to 2019. Asia/Pacific and North America experienced a 20% to 25% reduc-
tion in domestic passenger traffic than international [22].
With the aim of mitigating the risk of infections brought by international air travel
various policies have been practised that affected aviation. These policies related to
COVID-19 can be divided into two categories: a) policies about passenger movements,
especially across international borders and domestic travel and b) policies assisting the
restart of aviation. The two categories aim to stimulate the demand for air travel safely
and facilitate the delivery of the travel services via supporting the survival of the severely
impacted air traffic.
2.1. Policy Measures Affecting International Passenger Entry and Domestic Travel
Yu and Chen suggest that policies against COVID-19 transmission via air travel vary
from country to country due to unequal public health preparedness levels, socioeconomic
and political environment differences [23]. The USA imposed entry screening at desig-
nated airports for international passengers and banned non-US citizen travellers from the
EU, China and Iran. EU Member states also imposed travel restrictions, leading to a sig-
nificant reduction of capacity.
According to the UNWTO (United Nations World Tourism Organization) in May
2020 at 217 destinations worldwide, 97 (45%) of them partially or completely closed their
borders to tourists, 65 destinations (30%) suspended international flights partially or com-
pletely and 39 destinations (18%) banned the entry of passengers from specific countries
of origin or passengers who had transited through specific destinations [24]. Thus the
pandemic has caused a significant loss in city-pair connectivity, an essential element for
vital economic activities.
With the scientific understanding of the pandemic gradually increasing, countries
showing signs of control of its spread eased their entry restrictions. In June 2020, the Eu-
ropean Union adopted a coordinated approach of gradually lifting the temporary re-
strictions on non-essential travel into the EU. Based on this approach, member states have
three common criteria (i.e., notification, test positivity and testing rate) [25]. Passengers
are obliged to complete a passenger’s locator form and, in some cases to undergo quaran-
tine/self-quarantine; and/or take a test for COVID-19 infection before or after arrival. An-
other policy measure adopted by some countries is bilateral agreements that allow vac-
cinated individuals to visit the other state (e.g., Greece-Israel agreement). The EU has put
in place the EU Digital COVID Certificate, which permits individuals, who have been vac-
cinated, received a negative test result, or recovered from COVID-19, to travel more easily
and support the restart of air travel.
Vaccination roll-outs are pivotal for easing entry restrictions and restarting air travel.
Sun et al. suggest that vaccination passports are required for reviving international con-
nectivity [26]. On 22 July 2020, the COVID-19 vaccination roll-out started in China. As of
12 November 2021, a total of 2,337,700,250 vaccine doses had been administered, with
151.45 doses administered per 100 population in China. As of 18 November 2021, a total
of 7,370,902,499 vaccine doses had been administered worldwide (WHO, 2021). Airlines
select to fly to places with high vaccination rates. So as vaccination roll-outs have been
intensified, restrictions have been easing worldwide, with the exceptions of Myanmar,
Libya, Greenland, Afghanistan, Lao People’s Democratic Republic, North Korea and Pa-
pua New Guinea that still restrict travelling completely. On the other end, Mexico and
Colombia do not impose any travel restrictions.
Zhang et al. suggest that the slow recovery of passenger traffic in most counties can
be explained by the governments’ adoption of a “curve flattening” strategy. States would

Sustainability 2023, 15, 1525 4 of 24
relax restrictions firstly within their territory before coordinating with other authorities to
allow inter-State travel.
2.2. Policy Interventions for Aviation Recovery
Public policy interventions worldwide during COVID-19 have taken three forms, ac-
cording to OECD [27]. Untargeted support schemes, including job-retention schemes, pro-
vide liquidity to firms. Sectoral schemes support a specific sector like airlines in Australia
and firm-specific support measures, including partial or total nationalisation. Several
countries have offered financial support to aviation, in the form of government-backed
commercial loans and government guarantees; recapitalisation through state equity; flight
subsidies, nationalisation; deferral and/or waiver of taxes and charges; grants; and private
equity (Abate et al., 2020) [14].
The nationalisation of airlines is often implemented to save airlines from bankruptcy
and protect the tourism industry [28]. Law changes are also another step followed in ex-
treme cases of volatility. Germany, for example, to sustain airlines against insolvency and
protect them from bankruptcy, at the outbreak of COVID-19, changed its insolvency law
through the COVID-19 Act. This temporarily suspends the obligation to file for insolvency
and limits the liability of directors where insolvency is caused by COVID-19.
According to IATA Economics , the airline industry has survived thanks to financial
aid, with airlines having received $243 billion of financial aid worldwide so far (Table 1)
[29]. The aid has been primarily provided to airlines in the USA, Europe, and Asia, and
limited or no support has been provided for Latin American and African carriers. In 2020,
over 40 commercial airlines failed or completely ceased operations (Kim and Sohn, 2021).
Considering the severity of the impact and the long and winding recovery, government
funds are not enough to keep airlines afloat, and external cash injections were sought by
airlines (Dube et al., 2021).
Table 1. Financial aid made available to airlines due to COVID-19, by type (USD billions).
Financial Aid
Amount in USD bn
Wage subsidies
81
Loans
73
Direct aid (cash injections, equity financing)
38
Loan guarantees
26
Ticket taxes
13
Corporate taxes
12
Fuel taxes
1
Blocked funds
0
Total
243
Source: IATA Economics, 4 October 2021.
The involvement of governments in the aviation recovery of private aviation compa-
nies affects the market environment and competition. Some government financial pack-
ages to individual airlines and airports have caused disputes (e.g., Ryanair’s court case
against the state aid to KLM and TAP), citing unfair competition and special treatment. In
their analysis of Virgin Australia bailout, Zhang and Zhang conclude that while the gov-
ernment should refrain from giving direct financial aid to a failing firm, if the private sale
deal failed, the cost for Australian consumers and regional communities would be sub-
stantial [30].
Both national governments and international organisations support the recovery of
domestic and international aviation. Kim and Sohn (2021) state that the Korean govern-
ment’s support is similar to other countries and includes relaxing slot allocation rules,
reducing and exemption of airports charges, airline ticket prepayments, subsidies, and

Sustainability 2023, 15, 1525 5 of 24
loans. International organisations like ICAO, IATA, Airports Council International (ACI)
and UNWTO provide support in the form of market intelligence reports, guidance docu-
ments, standards, and recommended practices.
2.3. China’s Policy Interventions
As with other countries, China has introduced policies related to control of passenger
movements and the recovery of aviation. Domestic travel has been very much affected by
national policies pertaining to lockdowns, strict testing and quarantine requirements with
domestic outbreaks, and travel restrictions. A prime example of this is during the Chinese
New Year celebrations of January/February 2021. There was not a blanket travel ban for
all domestic travel, but instead, there were extensive testing and quarantine requirements.
Moreover, certain states offered financial incentives to workers to stay at home, gave free
admission to cultural venues/facilities or offered shopping coupons or discounted rent—
all trying to encourage residents to stay local [31]. This did defer travel somewhat, but
most scholars agree that the domestic market is not far off pre-COVID-19 levels (Warnock-
Smith et al., 2021; Czerny, 2021).
Policies related to international passenger movements have been very different. In
the early months of 2020 when COVID-19 cases in China were very high, many other
countries closed borders, introduced travel restrictions and health checks with flights
from China. However, as COVID-19 spread elsewhere, the Civil Aviation Administration
of China (CAAC) progressively introduced a number of policies aimed at preventing and
controlling the COVID-19 cases (Table 2). This began on 12 March 2022 when there was a
new international flight schedule which replaced the routes and flight frequency agreed
in the air service agreements and on 19 March the number of flights were only allowed to
decrease rather than increase. A few days later on 22 March all passenger flights destined
to Beijing were diverted to various designated first entry points in order to control the risk
of importing the pandemic to the capital.
Table 2. Chinese International Aviation Policies related to COVID-19.
Issue Time
Policy Title
12 March 2020
International Flight Schedule Information (No. 5)
There were 2072 weekly flights, flying by 77
airlines (both passenger and cargo), allowed for
506 routes between China and 49 countries
during 16–22 March 2020
19 March 2020
(void on 26 March
2020)
Announcement on Controlling the Number of
International Passenger Flights during the
Epidemic Prevention and Control
To control the number of flights they can only
decrease and not increase
22 March 2020
The First Entry Point for International Flights
Destined for Beijing
All passenger flights destined to Beijing must
enter in the designated first entry points (10
airports selected for named airlines)
23 March 2020
International Flight Schedule Information (No. 6)
There were 2003 weekly flights, flying by 75
airlines (both passenger and cargo), allowed for
477 routes between China and 49 countries
during 23–29 March 2020
26 March 2020
(void on 04 June
2020)
Announcement on the Continued Reduction of
International Passenger Flights during the
Epidemic Prevention and Control
Chinese airlines are only allowed to maintain one
route to any specific country with no more than
one flight per week; each foreign airline is only
allowed to maintain one route to China with no
more than one weekly flight (the five one policy)
and for epidemic prevention and control load fac-
tors may not be higher than 75%

Sustainability 2023, 15, 1525 6 of 24
3April 2020
Notice on the Establishment of a ‘Green Channel’
for Approval of International Air Cargo during
the Epidemic Prevention and Control
Establishes a temporary green channel to
promote the planning of international cargo
flights and to shorten the processing time
25 May 2020
Notice on the Establishment of a ‘Green Channel’
for the Approval of the International Passenger
Charter Plan for the Resumption of Production
and Work
Establishes a temporary green channel to
promote the planning of international passenger
charter flights and to shorten the processing time
4 June 2020
Notice on the Adjustment of International
Passenger Flights by CAAC
Maintains the five one policy. Introduces flight
incentives and circuit breaking ‘fusing’ measures
16 July 2020
List of AirPort Cities with Capability to
Accommodate International Passenger Flights
Lists 37 cities
1 Sept. 2020
The Further Implementation of Strict
Management on International Passenger Flights
with High Risks
Load factors may not be higher than 75% on three
types of high risk international inbound
passenger flights
2 Sept. 2020
Passenger Flights to Beijing that are Diverted to
the First Point of Entry will Gradually Resume
Direct Flights
Allows flights from 17 countries to resume direct
flights to Beijing
16 Dec. 2020 (void
on 28 April 2021)
Notice on Adjusting ‘Fusing’ Measures for
International Passenger Flights
Introduces changes to the fusing measures
16 Dec. 2020
Notice on Regulating International Scheduled
Passenger Flight Plans during the Normalization
of the COVID-19 Epidemic Prevention and
Control Period
Relates to strengthening airline management
(pandemic prevention/control, flight operations
and changes) and implementing information
reporting (changes, cancellations)
28 April 2021
Notice on the Adjustment of ‘Fusing’ Measures
for International Scheduled Passenger Flights
Introduces further changes to the fusing
measures
Source: Compiled by the authors from the CAAC website (http://www.caac.gov.cn, accessed on 25
March 2022.).
As the pandemic spread worldwide more radical policies were introduced on 26
March with the so-called ‘Five One’ rule. This limited Chinese airlines to serving one route
to any specific country with no more than one flight per week, and for foreign airlines to
serving one route to China with no more than one weekly flight—hence strongly influ-
encing the range of services that could be provided (Liu et al., 2021). At the same time load
factors could be not higher than 75% with the aim to prevent infection. On 4 June, some
more novel policies were added, with the CAAC imposing penalties for international
flights found to carry passengers testing positive for COVID-19. Airlines found to have at
least five passengers testing positive were to have their operations suspended for one
week. If the positive tests reached 10, their operations were to be suspended for four
weeks. This policy was known as a ‘circuit breaker’ or the ‘fusing’ of flights. At the same
time there were incentives when if there were zero test results for three consecutive weeks,
the number of flights could be increased by one flight per week (subject to the route oper-
ation licence), up to a maximum of two flights per week. The circuit breaker policy was
changed in December 2020 when airlines had to suspend their operations for two rather
than one week if they had at least five passengers testing positive (the four weeks suspen-
sion for 10 infected passengers remained the same). It was further changed in April 2021,
when airlines found to carry more than five COVID-19 positive passengers could choose
between two types of restrictions: frequency-based, or load factor-based. For frequency-
based penalties, the airline would have to suspend operating into China for two weeks,
whereas for load factor restrictions, the airline would only be allowed to operate at no
higher than 40% passenger load factor for four weeks. However for flights with 10 or more
infections this load factor penalty was not permitted and flights had to be suspended.

Sustainability 2023, 15, 1525 7 of 24
The impact of this fusing policy for individual airlines through time is shown in Fig-
ure 1 and quite clearly Cathay Pacific has been the most severely affected by this. The five
one and fusing policy was described by Czerny et al. as outcome-based regulation by
which the government tried to deal with improving international connectivity whilst at
the same time tightly controlling the spread of COVID-19 cases. It received criticism from
the US government stating that it violates the nations’ air services agreement and places
undue culpability on carriers. In addition, China introduced travel bans to certain coun-
tries, stringent health checks and mandatory quarantine to limit the infection rates of the
virus. It implemented a double negative tests policy, like some other countries, where all
passengers flying to China needed to take both nucleic acid, IgM anti-body tests and apply
for green health codes or certified health declaration forms within 48 h before boarding
the flight. Yu and Chen (2021) found that the fusing policy was not effective to reduce the
number of imported cases, whereas this double negative test policy was.
Figure 1. Fused Flights by Airline (14 June 2020–25 March 2022). Note: only airlines with 5 or more
fused flights are shown.
In the early months of 2020 when all traffic was severely depressed the Chinese gov-
ernment introduced various measures to provide relief to the airlines, by reducing costs
and promoting growth. A payment scheme was introduced of US$0.0027 per available
seat-kilometre (ASK) for flights on routes served by multiple airlines, and US$0.0081 per
ASK for a route where the carrier was a sole operator to encourage the airlines to keep
flying [32]. In addition, Class 1 airports (with passenger numbers > 4% of total passengers)
and Class 2 airports (with passengers between 1%-4% of total) had their landing charges
cut by 10% and parking fees waived, and there were reductions in air traffic control fees
and fuel costs as well (Flightglobal, 2020). Moreover, the government waived mandated
contributions from passengers and airlines to the Civil Aviation Development Fund
(Czerney et al., 2021). Hong Kong airport (operated by the Hong Kong government) also
introduced relief measures such as fee reductions and rental concessions/waivers targeted
at airlines, retail and catering outlets, ground handling agents and others (Warnock-Smith
et al., 2021) in an effort to support the industry which suffered even stricter COVID-19
measures at this airport than in mainland China [33].
There were also other efforts to specifically strengthen domestic traffic. Secondary
airports were affected less by COVID-19 due to their smaller dependence on international
traffic but at the same time due to their limited capital reserves were more vulnerable to
external shocks [34]. Hou et al. (2021) state that this is also the case for Chinese small air-
ports that mainly live on government subsidies. As a measure to reduce the pandemic
010 20 30 40 50 60
Cathay Pacific
Czech Airlines
China Eastern
Air France
Egyptair
Kenya Airways
Emirates
Saudi Arabian
Turkish Airlines
Aeroflot
LOT
Ethiopian Airlines
Xiamen Airlines
Iraqi Airways
Number of flights

Sustainability 2023, 15, 1525 8 of 24
impact on the small airports, the Chinese government launched special subsidy programs,
where small airports in Southwestern and Northern regions received more subsidies due
to their more adverse traffic drop and importance to local communities, though this meas-
ure was removed quite swiftly.
Moreover, further liberalisation in the form of access to new routes can support avi-
ation recovery. The CAAC removed capacity constraints of the Beijing, Shanghai and
Guangzhou hub airports and granted small airport access to hub airports enhancing,
therefore, domestic traffic. According to the new rule, carriers can apply for slots in Bei-
jing, Shanghai and Guangzhou to serve small airports with an annual passenger through-
put of less than 1 million, as long as the airlines operate at least 15 routes from the hub
airports (Hou et al., 2021).
In terms of fares, press reports indicated that in May 2020 fares between China and
US were up to ten times higher than those before COVID-19 [35] whereas in August 2021
they were reported to be five times more expensive that in August 2020 [36]. It was argued
that much of this was due to the shortage of flight supply and many Chinese and overseas
students wanting to return to China. Whilst there is also some similar evidence for a few
other specific routes, there exists no systematic verification of this trend and so this is one
of the aims of this research.
Meanwhile, Hong Kong which had separate COVID-19 policies maintained some of
the world’s strictest border rules including blocking non-residents from entry and enforc-
ing 21 day quarantines for travellers. It also had its own circuit breaker policies in relation
to air transport. In 2020 it introduced a flight-specific mechanism which prohibited flights
from serving Hong Kong for 14 days if:-
1. Five or more passengers arriving on the same flight at Hong Kong had a positive
COVID-19 test; or
2. Three or more passengers on two consecutive flights with the same airline from the
same place had a positive COVID-19 test; or
3. One or more passengers arriving on the same flight had a positive COVID-19 test
with one or more passengers failing to comply with the requirement(s) specified un-
der the the Prevention and Control of Disease (Regulation of Cross-boundary Con-
veyances and Travellers) Regulation.
This policy was tightened on 14 April 2021 by replacing ‘five or more’ with ‘three or
more’ in condition 1, and ‘three or more’ with ‘two or more’ in condition 2, and then again
in December 2021 when condition 2 was replaced with ‘four or more passengers on any
flights of the same airline from the same place within a seven-day period had a positive
COVID-19 test’. Also in April 2021, a new place-specific suspension mechanism was
added. With this if five or more passengers on all flights from the same place, regardless
of airline, were confirmed to be COVID-19 positive within a seven-day period, all passen-
ger flights from that place were banned for 14 days. Various passenger restrictions and
quarantine conditions were also imposed on passengers from this place which would be
specified as very high-risk [37]. Since then this mechanism has been used for various coun-
tries. For example, it was first introduced in April 2020 for India, Pakistan and the Philip-
pines. The UK was one of a number of countries that has been on this very high-risk list,
with flight bans imposed in December 2020, July 2021 and then in January 2022 along with
US, Australia, Canada, France, India, Pakistan and the Philippines. Most recently the Gov-
ernment announced that from 1 April 2022 the place-specific suspension mechanism
would be lifted although the flight-specific suspension mechanism would continue with
some adjustments [38]. This move was most welcomed by the airlines who have viewed
the policies as being very restrictive.
3. Method and Data
The analysis uses extensive secondary data from three reliable sources. To provide
an overview of the Chinese air travel market, and to track overall trends before and since

Sustainability 2023, 15, 1525 9 of 24
COVID-19, data published by the CAAC (Statistics of Key Performance Indicators for
China’s Civil Aviation Industry and Statistical Bulletin of Civil Aviation Industry Devel-
opment) has been presented [39]. More detailed demand and supply data are then used,
focusing primarily on the three internationally important Chinese markets: China to Eu-
rope, China to North America, and China to Asia. The supply analysis was conducted
using Official Airline Guide (OAG) data. OAG is a comprehensive subscription database
that records 96% of global passenger itineraries. OAG has been used in various academic
papers (e.g., Corbet et al., 2019; Lei and O’Connell, 2011; Warnock-Smith et al. 2021). This
database does not include charter or cargo flights. Daily capacity data reported by origin-
destination (O-D) pairs from January 2019 to September 2021 were collected.
Demand and revenue analysis was conducted using Sabre AirVision Market Intelli-
gence Data Tapes (MIDT) subscription database. MIDT collects data on passenger de-
mand, fares and airline revenues but includes only indirect bookings such as online travel
agency and global travel retailer bookings through a Global Distribution System (GDS).
The provided data uses an algorithm that considers direct bookings to estimate total de-
mand, average fares, and revenues [40]. The data was collected from January 2019 through
to June 2021. To reflect market concentration levels of the three respective markets and to
ensure a consistent approach, origin-destination passenger data were extracted for the top
10 carriers. This covered 70% of the total market on China to North America, 64% on China
to Europe and 50% on China to the rest of Asia in the year 2020.
For the policy analysis, the description of air policy developments as detailed in Sec-
tion 2.3 was expanded on through a multiple regression analysis of the impact of the
China Five-one international market policy on international seat capacity developments
in China to Europe, North America and Asia. Although there were a number of sub-
policies, the five/one policy was selected as the most appropriate policy independent
variable to use in the regression given the broader nature of the data at the international
route group level, which is not specific to individual airports or routes. Five/one sets the
overall level of permitted supply on Chinese international markets. The other policies
starting in June 2020 such as fusing and specific permitted entry points all work within
the continued and broader five/one policy and can therfore be assumed to incrementally
impact specific routes/airports within what was a generally supressed market at different
points during the pandemic.
Air transport supply, using seat capacity data from OAG was selected as the most
appropriate dependent variable rather than traffic given the more intuitive link between
the imposition of air operator restrictions and the supply of seat capacity. It is recognised
that in the absence of air operator restrictions, supply would have reduced anyway as a
response to reduced traveller confidence and demand for air travel. Without any data on
the counterfactual, however, it was not possible to explicitly estimate this. Average fares,
and combined quartely GDP growth were selected as the other explanatory variables
along with the Five/one policy with the expected relationship with market capacity
offered being negative, positive and negative respectively. The observed period was
January 2019 to June 2021. Although time series data can lead to autocorrelation issues
when estimating with OLS, on this occasion OLS was selected as there was no detectable
correlation between residuals in any of the regressions. The other OLS assumptions of
normality and no multicollinearity were also met. Due to the unprecendented impact of
COVID-19 on the aviation market, regular assumptions related to patterns in time-series
data did not hold for the observed period. The observed months themsevles were
therefore set as observations in the regressions (n = 30).
4. Results and Discussion
4.1. Aggregate Picture
Overall trends between January 2019 and June 2021 in seat capacity, total passengers,
and total revenues on the major China international markets (Europe-China, Rest of Asia-

Sustainability 2023, 15, 1525 10 of 24
China and North America-China) were compiled (Figures 2–4). In line with the aggregate
airport trends, there has been a sustained drop in capacity offered, traffic and carrier
revenues from January 2020 onwards, with very little evidence of recovery up to the latest
month of available Sabre data at the time of writing (June 2021). The only variations of
note are the marginal uptick in total revenues on Europe and North America to China
markets from February to June 2021 and the increased seat capacity offering of carriers on
North America-China markets between June and December 2020. The former was driven
by a notable increase in average fares (using reported Sabre data). On Europe-China
markets, average fares increased by 41% from USD844 to USD1187 over this period
despite traffic and capacity indicators remaining static. From North America to China, the
uptick in average fares has been less pronounced (18% from USD1506 to USD1772) and
only starting in April rather than February 2021. This is supported by IATA World Air
Transport Statistics (2021 p39), showing the second largest systemwide drop in passenger
load factors of −28.1% in 2020 to 54.4% (second only the Europe-North America market
experienced a −31.2% drop in 2020 passenger load factor) (A proportion of the observed
difference between traffic (Sabre) and capacity (OAG) could also be due to some carriers
over-reporting capacity to OAG during what was an uncertain period of travel re-
strictions). The continued presence of travel restrictions on international Chinese markets
has impacted the likelihood of any short-term recovery in traffic, capacity, and revenues,
despite the marginal variations observed between the major regional route markets.
Figure 2. Overall trend 19 January to 21 June in Europe-China seats, passengers and total
revenues. Sources: Sabre & OAG (notes: seats/traffic is reported birectional, Revenues reported on
secondary axis).
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
$900,000,000
$1,000,000,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Number of seats/pax
Total pax Seats (OAG) Total rev

Sustainability 2023, 15, 1525 11 of 24
Figure 3. Overall trend Jan-19 to Jun-21 in Rest of Asia-China seats, passengers and total revenues.
Sources: Sabre & OAG (notes: seats/traffic is reported birectional, Revenues report on secondary
axis).
Figure 4. Overall trend Jan-19 to Jun-21 in North America-China seats, passengers and total
revenues. Sources: Sabre & OAG (notes: seats/traffic is reported birectional, Revenues report on
secondary axis).
The other overall trend picked up in the Sabre and IATA data (IATA World Air
Transport Statistics, 2021, p39) has been variation between premium and economy traffic
and revenues. Despite unanimous falls in overall international traffic and revenues, falls
noted in premium classes have been even more pronounced than in economy to the tune
of −0.4%, −3.1% and −0.8% on the Asia Pacific, Europe and North America markets,
respectively (by RPK and region of airline domicile). Data from Sabre on Europe, Rest of
Asia and North America to China markets (Figure 5) show markedly more significant
drops in premium versus economy revenues between June 2021 and June 2019 levels.
However, unlike the IATA data, economic traffic is slightly more depressed than
premium traffic as a percentage of June 2019 levels. In all cases, revenue dropped by a
lower rate than traffic, with airlines able to exploit a perceived need for essential travel
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
Number of seats/pax
Total pax Seats (OAG) Total rev
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
$900,000,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
Number of seats/pax
Total pax Seats (OAG) Total rev

Sustainability 2023, 15, 1525 12 of 24
throughout the pandemic. Airlines have generally been able to do this to a greater extent,
however, in economy class instead of premium classes.
Figure 5. Overall June 2021 vs June 2019 difference in falls on three major Chinese international
markets between premium and economy traffic and revenues Source: Sabre.
Having gained an appreciation of the overall impact of COVID-19 on Chinese air
transport market patterns, the remaining analysis focuses on breaking down the overall
Chinese international market into individual route groups and carriers to obtain some
indicators of which market elements have been worst and least affected by the COVID-19
pandemic.
4.2. Carriers Serving Chinese International Markets
Representing 63%, 47% and 89% of total O&D market traffic, respectively, the top 10
carriers on three major international route markets involving China have all seen
significant drops in traffic between 2019 and the first half of 2021 (Table 3). Despite
universal reductions in traffic, there have been some sizeable shifts in relative market
share between carriers. On Europe to China, Lufthansa (LH) was the largest carrier in the
first six months of 2021 despite being the fourth largest in 2019. Air China (CA), the largest
operator in 2019, fell back to second in the first six months of 2021. On Rest of Asia to
China, Spring Airlines (9C) was the top carrier in 2020 despite being 5th largest in 2019,
with China Southern dropping from largest to fourth-largest, though Spring Airlines saw
reduced traffic in the first half of 2021. Thai AirAsia (FD) flights were temporarily
suspended to China during large parts of 2020 and into 2021, with the carrier’s H1 focus
being on recovering Thai domestic routes. On the North America to China market, United
Airlines was largest in 2019 but dropped to third in 2020. Despite seeing a large drop in
traffic like everyone else on this market, Cathay Pacific (CX) has become largest in terms
of market share both in 2020 and the first half of 2021. Chinese carriers have naturally been
most exposed to falls in traffic on these major Chinese international markets, with Cathay
Pacific (CX), Air China (AC), China Eastern (MU) and China Southern (CZ) having large
market shares on all three route markets in 2019.
0
5
10
15
20
25
30
35
Europe-China ROA-China NA-China
% of June 2019 levels
Premium traffic (% of Jun 2019 level) Economy traffic (% of Jun 2019 level)
Premium revenue (% of Jun 2019 level) Economy revenue (% of Jun 2019 level)

Sustainability 2023, 15, 1525 13 of 24
Table 3. Top 10 carriers on Europe, Rest of Asia and North America to China markets (by O&D
traffic).
Europe to China
Rest of Asia to China
North America to China
Carrier
IATA Code
Total
O&D pax
2019
Total
O&D pax
2020
Total
O&D
pax H1
2021
Carrier
IATA
Code
Total
O&D pax
2019
Total
O&D pax
2020
Total
O&D
pax H1
2021
Carrier
IATA
Code
Total
O&D pax
2019
Total
O&D pax
2020
Total
O&D
pax H1
2021
CA
2,849,205
629,323
53,267
CZ
10,459,466
1,330,444
115,068
UA
1,859,726
252,215
51,093
SU
1,690,955
319,893
16,131
MU
10,010,708
1,492,602
164,646
CA
1,435,746
240,769
21,539
CX
1,566,129
441,788
47,897
CX
8,461,416
1,268,992
73,883
AC
1,335,100
225,994
43,535
LH
1,414,686
251,593
69,762
CA
7,256,581
1,096,286
81,902
CX
1,322,240
363,452
59,148
MU
1,043,063
263,626
33,298
9C
5,097,180
1,803,209
45,669
HU
1,246,849
181,660
12,158
HU
997,671
129,712
11,382
KE
4,688,789
821,667
66,760
MU
1,033,924
258,088
37,554
EK
873,462
136,887
3,912
OZ
4,259,583
1,751,664
64,156
DL
1,019,382
131,193
47,200
CZ
885,879
176,916
30,571
FD
3,135,577
371,176
0
CZ
946,442
156,582
45,965
AY
808,118
149,710
24,573
CI
3,508,316
440,602
40,631
AA
779,966
125,597
25,874
BA
755,668
202,403
33,432
HX
3,130,837
509,815
10,842
MF
249,134
73,996
27,537
Total top 10
12,884,835
2,701,852
324,226
60,008,451
10,886,456
663,557
11,228,508
2,009,547
371,603
% of total
62.6
63.6
49.5
46.6
49.4
33.8
88.8
69.9
87.4
Source: Sabre. Note: O&D traffic is bidirectional. See Table A1 of Appendix A for the corresponding
full airlines names of carrier IATA Codes.
Figure 6 shows developments in average fares and total revenues for the top 10
carriers on three major international markets involving China. As was the case for
passengers, universal reductions in revenues can be observed for all the main carriers
between 2019 and 2020. Despite being the fifth largest carrier on Rest of Asia to China
markets in 2019, Asiana Airlines (OZ) became the largest carrier in terms of revenue in
2020 with almost USD 290 mn. On Europe to China, Cathay Pacific (CX) retained its status
as the largest carrier in terms of revenue, though still experiencing a substantial drop in
revenue from USD1,094 mn down to USD288 mn. United Airlines (UA) took a
disproportionately big hit on North America to China markets, seeing a drop from USD
1.6 bn in 2019 down USD 214 million in 2020, leaving Cathay Pacific as the largest carrier
on that market too with USD336 million in earnings. In terms of average fare changes
between 2019 and 2020, levels were inconsistent between carriers as they grappled with
how best to respond to the artificially depressed market during 2020. For instance, British
Airways on Europe to China tried to respond to the demand situation with some average
fare reductions between 2019 and 2020, especially given they were the highest yield
operator on this market going into the pandemic. Lufthansa, on the other hand, saw an
increase in average fares over the same period. A similar situation prevailed on China to
Rest of Asia and China to North America markets with Cathay Pacific (CX), the highest
yield operator on both international markets, attempting to marginally reduce average
fares in both cases.

Sustainability 2023, 15, 1525 14 of 24
Figure 6. Top 10 carriers total revenues and average fares 2020 and 2019 on North America, ROA
and Europe to China markets.
With the exception of Spring Airlines (9C) and Thai AirAsia (FD), airlines that do not
offer a premium service configurations, all top 10 carriers on three major international
markets involving China carried at least some premium traffic. In 2019 premium revenues
represented only 18% of the top 10 carrier revenues on the rest of Asia to China markets.
On North America and Europe to China markets, premium revenues made up as much
as 52%. By the first half of 2021, overall premium revenues had plummeted, making up
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
CZ MU CX CA 9C KE OZ FD CI HX
Top 10 carrier revenues China to ROA
Total rev 2019 Total rev 2020
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
CA SU CX LH MU HU EK CZ AY BA
Top 10 carrier revenues Europe-China
Total rev 2019 Total rev 2020
$0
$200
$400
$600
$800
$1,000
CA SU CX LH MU HU EK CZ AY BA
Top 10 carrier average fare Europe-
China
Av fare 2019 Av fare 2020
$0
$50
$100
$150
$200
$250
CZ MU CX CA 9C KE OZ FD CI HX
Top 10 carrier average fare China to
ROA
Av fare 2019 Av fare 2020
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
UA CA AC CX HU MU DL CZ AA MF
Top 10 carrier revenues China to NA
Total rev 2019 Total rev 2020
$0
$200
$400
$600
$800
$1,000
UA CA AC CX HU MU DL CZ AA MF
Top 10 carrier average fare China to NA
Av fare 2019 Av fare 2020

Sustainability 2023, 15, 1525 15 of 24
only 29% of top 10 carrier revenues on North America to China markets, 31% of Europe
to China markets and 13% on Rest of Asia to China markets. Broken down by carrier only
in two cases there was a shift between 2019 and H1 2021 from economy to premium
revenues (Figure 7). There has been a shift from premium to economy revenues in all other
cases with both an economy and premium class offering. Carriers serving Europe to China
markets saw the biggest changes with Air China (CA) and Hainan Airlines (HU) seeing
as much as a 25–35% shift. Air China (AC) also saw a similar shift between premium and
economy revenues on North America to China markets, showing a consistent impact on
Air China during the pandemic. Only China Airlines (CI) based in Taiwan on Rest of Asia
to China routes and Xiamen Airlines (MF) on North America to China routes saw any sort
of resilience in their premium classes, though in the case of CI this was partly due to
particularly marked reductions in economy revenues over the observed period (USD398
mn in 2019 down to just USD12 mn in H1 2021).
British Airways (66%), Lufthansa (59%) and Cathay Pacific (57%) were the most
heavily reliant of the top 10 carriers on premium revenues on Europe to China markets
before the COVID-19 pandemic. In all three cases by H1 2021, premium revenues
represented a minority share of total revenues. United Airlines (63%) and Cathay Pacific
(61%) were similar in North America to China markets, depending on premium traffic
going into the pandemic. In the case of United Airlines, by H1 2021, only 31% of total
revenues were from premium classes. The worry for these carriers is the extent to which
pre-pandemic business models that were reliant on premium revenues can continue into
the post-pandemic period, given the well-documented shift of business practises to more
virtual meetings during the pandemic. Carriers like Air Canada (only 39% in 2019) and
China Southern (only 32% in 2019) on North America to China markets may benefit from
a more sustained shift between business and economy revenues given that they went into
the pandemic much less reliant on premium revenues. The same applies to Aeroflot (only
29% in 2019) and China Southern on Europe to China markets.

Sustainability 2023, 15, 1525 16 of 24
Figure 7. Top 10 carriers percentage shift in premium and economy revenues as a percentage of
total revenues.
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
CZ MU CX CA 9C KE OZ FD CI HX
% shift premium to economy revenue
China to ROA Premium to economy revenue %
shift 2019-H12021
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
UA CA AC CX HU MU DL CZ AA MF
% shift premium to economy revenue
China to NA Premium to economy revenue %
shift 2019-H12021
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
LH CA CX BA MU CZ AY SU HU EK
% shift premium to economy revenue
China to Europe Premium to economy revenue %
shift 2019-H12021

Sustainability 2023, 15, 1525 17 of 24
4.3. Chinese International Routes
On each of the three selected international markets involving China, the top 10 routes
are reported in Table 4. Compared to the top 10 carriers, the top 10 routes naturally
represent a lower share of the total O&D market given the higher number of O&D
combinations compared to the number of serving air carriers. The top 10 routes
represented 13%, 16% and 25% of the total market on Europe, Rest of Asia and North
America to China, respectively. All observed routes have been badly impacted by the
pandemic, as expected. Hong Kong to London Heathrow (HKG-LHR) remained the
largest Europe to China route throughout the period despite substantial falls in traffic.
On the other hand, the Beijing Capital to Moscow Sheremetyevo (PEK-SVO) route
reduced to negligible levels by H1 2021, third lowest on what was the original top 10
listing in 2019. On the Rest of Asia to China market it appears that the stricter travel
restrictions in Hong Kong in comparison to the rest of China and the wider region [41]
has at least temporarily reduced Hong Kong’s prominent role in serving the highly
popular regional route to Taipei (HKG-TPE). By H1 2021 Shanghai Pudong to Taipei
(PVG-TPE) was the largest route in this market up from eigth with just over 61,000 O&D
passengers. HKG-TPE fell to sixth largest in H1 2021 with only 20,700 O&D passengers.
The role of Shaghai Pudong (PVG) on North America to China markets has also increased
relative to other key Chinese airport gateways, with the top 2 largest routes by H1 2021
being PVG-SFO (San Francisco) and PVG-YYZ (Toronto), although still at very low
numbers in comparison to 2019. Hong Kong and Beijing Capital airports were running
their previously very busy North America routes at negligible levels by H1 2021. Hong
Kong (HKG) to San Francisco (SFO), the largest route in this international market in 2019,
was estimated to have only 5% of 2019 traffic in 2021 (full year estimate). In contrast, PVG-
SFO is estimated to have around 38% of 2019 levels in full year 2021.
Table 4. Top 10 routes on Europe, Rest of Asia and North America to China markets (by O&D
traffic).
Europe to China
Rest of Asia to China
North America to China
Routes
Total
O&D pax
2019
Total
O&D pax
2020
Total
O&D pax
H1 2021
Routes
Total
O&D pax
2019
Total
O&D pax
2020
Total
O&D pax
H1 2021
Routes
Total
O&D pax
2019
Total
O&D pax
2020
Total
O&D pax
H1 2021
HKG-
LHR
909,585
342,322
61,439
HKG-TPE
4,727,238
622,575
20,713
HKG-SFO
440,838
95,256
12,165
PEK-SVO
286,417
46,828
1,400
HKG-
BKK
2,362,064
391,432
15,823
PVG-LAX
423,545
92,032
4,177
PVG-FRA
381,194
73,271
37,176
HKG-
MNL
1,650,547
302,596
38,042
HKG-
LAX
316,992
139,862
22,929
PVG-
SVO
201,331
31,606
13,548
HKG-
NRT
1,669,475
281,317
16,524
HKG-
YVR
314,025
80,250
5,671
PEK-
CDG
252,960
45,845
4,668
HKG-SIN
1,870,253
288,113
55,506
PEK-YYZ
308,967
72,148
11,622
PEK-FRA
194,012
24,322
4,536
HKG-KIX
1,683,495
246,280
7,988
PEK-LAX
290,629
64,516
6,770
PEK-
MUC
150,866
13,359
463
PVG-ICN
1,863,721
643,319
16,690
HKG-YYZ
286,643
62,960
6,309
PEK-
AMS
108,706
23,672
2,036
TAO-ICN
1,854,431
350,669
29,695
PVG-YYZ
247,776
69,890
22,962
HKG-
HEL
56,747
20,578
3,471
PVG-TPE
1,528,416
263,035
61,176
PVG-SFO
246,560
85,566
47,507
HKG-
MUC
136,276
14,913
661
PVG-SIN
1,254,255
214,887
31,437
CAN-JFK
224,183
46,517
629
Total top
10
2,678,094
636,716
129,398
20,463,894
2,981,647
272,881
3,100,159
808,997
140,740
% of total
13.0
15.0
19.7
15.9
13.5
13.9
24.5
28.2
33.1
Source: Sabre. Note: O&D traffic is bidirectional. See Table A2 of Appendix A for the corresponding
full airport names of IATA airport Codes.
Figure 8 reports route based market performance with respect to average fares and
total revenues. Hong Kong to London Heathrow has dominated revenues on Europe to
China both in 2019 and 2020 despite the significant drop in total revenues on that route.

Sustainability 2023, 15, 1525 18 of 24
Figure 8. Top 10 routes total revenues and average fares 2019 and 2020 on North America, ROA and
Europe to China markets.
On Rest of Asia to China, Shanghai Pudong to Singapore (PVG-SIN) generated the
highest revenue in 2019 despite not being the largest route in terms of traffic. By 2020,
however, it experienced a much bigger percentage drop than Shanghai Pudong to Seoul
Incheon (PVG-ICN), which was the largest revenue generating route in 2020. Revenues
$0
$100
$200
$300
$400
$500
$600
$700
$800
Top 10 route average fare Europe-
China
Av fare 2019 Av fare 2020
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
Top 10 route revenues China to ROA
Total rev 2019 Total rev 2020
$0
$100
$200
$300
$400
$500
Top 10 route average fare China to
ROA
Av fare 2019 Av fare 2020
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
Top 10 routes revenues China to NA
Total rev 2019 Total rev 2020
$0
$500
$1,000
$1,500
$2,000
$2,500
Top 10 routes average fare China to
NA
Av fare 2019 Av fare 2020
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
Top 10 route revenues Europe-China
Total rev 2019 Total rev 2020

Sustainability 2023, 15, 1525 19 of 24
on the Hong Kong to San Francisco (HKG-SFO) route collapsed to such an extent that in
2020 it was only the third largest revenue generating route amongst the top 10 North
America to China routes with Shanghai Pudong to San Francisco (PVG-SFO) displaying a
remarkably small drop in revenues, given the circumstances, from USD189 mn to USD174
mn, reflected by the very large increase in average fares on this route from USD744 to over
USD2,000, helping to sustain revenues despite 2020 passenger volumes dropping to 35%
of 2019 levels. According to Airport Technology (2021), Shanghai Pudong is positioning
itself longer-term as a major international hub. Home to large China Eastern and Air
China bases already, creating a new Terminal 3 will further increase its transferring
capability between international and domestic routes. Regarding average fares, there has
been a tendency, on top 10 North America to China routes, for average fares to increase
(in particular on the PVG-SFO route as previously discussed), whereas in the other two
international route groups, change in average fares has been more inconsistent between
individual routes, reflecting the incongruent pricing decisions of carriers serving those
markets, their respective market share on each route and competitive pricing dynamics
between carriers serving the same O&D markets. To illustrate, the PVG-SVG route in
August 2020 was directly served by only two carriers (United Airlines and China Eastern),
each with seven flights a week, leading to limited competitive pressures, whereas the
PVG-SIN market was served by four carriers in August 2020 despite traffic loses (Spring
Airlines—7 weekly flights with an A320 and Singapore, China Eastern and Juneyao
Airlines all with 1 flight a week with a larger B787 aircraft gauge (OAG, 2021).
In connection with the air policy review contained in Section 2.3, the relationship
between the imposition of the five one policy on international routes to and from China
and developments in seat capacity over the period January 2019 to June 2021 was tested
through an OLS multiple regression analysis covering Europe, North America, and Rest
of Asia to China markets. Equation 1 expresses the regression variate and Table 5
summarises the results.
𝑌𝑖 = 𝛼 + 𝛽1𝐴𝑉𝐹𝐴𝑅𝐸𝑖 + 𝛽2𝐺𝐷𝑃𝐺𝑖 + 𝛽3𝐹𝐼𝑉𝐸𝑂𝑁𝐸𝑖 + 𝜀𝑖
(1)
where
i
Y
is aggregated monthly biderectional seat capacity as reported by OAG;
i
AVFARE
is average market fares per month reported in US dollars as provided by
Sabre,
i
GDPG
is the combined average quartely GDP growth rate versus the previous
quarter involving China and international country groupings,
i
FIVEONE
is
represented as a dummy variable representing China’s activation of its Covid related
international travel restrictons, taking a value of zero until the month of March 2020 and
a value of one from April 2020 through to June 2021 whilst the policy was activated during
the observed period and 𝜀 is the error term.
Table 5. Multiple regression outputs: Seat capacity on Europe, NA and ROA to China (excluding
HK).
Europe-China
NA-China
ROA-China
R Square
0.92
0.54
0.89
Intercept
* 2,436,628
* 1,367,260
* 11,120,258
Av fare
* −1345
* * −386
2131
Average GDP growth (compared to
previous quarter)
* 123,181
* 33,032
** 379,956
Five/one policy
* −1,139,498
* −474,881
* −11,326,426
Notes: * Significant at the 1% level; ** Significant at the 5% level; n = 30 months (Jan 19–Jun 21). Data
sources: Seat capacity (OAG), Average fares (Sabre), GDP growth (National Bereau of Statistics of
China, Eurostat, Statistics and Trading Economics), Five/one policy (CAAC.)

Sustainability 2023, 15, 1525 20 of 24
The Five one policy was found to have a significant impact on seat capacity in all
three markets and with the expected negative sign. It had a strong explanatory impact on
both Europe to China and ROA to China markets. Though still significant, its impact
magnitude was less on NA to China. This seems to be due to the very low load factors
observed during the April to December 2020 period on this market.
Despite not being able to counterfactually estimate any reductions in capacity that
might have occurred anyway in the absence of travel restrictions (due to reduced traveller
confidence), the observed data and regression results are confirmatory of an immediate
and unprecedented reduction in seat capacity from April 2020 onwards, timed exactly
with the impositions of the restrictive Five/one policy at the end of March 2020 (see Table
2, Section 2.3).
The activation of the Five one policy was associated with a significant 1.14 mn, 0.47
mn and 11.3 mn reduction in seat capacity on China to Europe, North America and Asia
markets respectively. This contrasts with a 1% increase in combined GDP relative to the
previous quarter being associated with an atypically small increase of 0.12 mn, 0.03 mn
and 0.4 mn seats in the same markets. Whilst average air fares had an unexpected sign on
Asia to China markets it was not significant. For China to Europe and China to North
America markets a USD $50 average fare increase was associated with an atypically small
reduction of 0.07 mn and 0.02 mn seats respectively. Compared with previous studies
undertaken before the pandemic, the impact of GDP and average fares on market capacity
appears low. The unprecedented nature of the pandemic and the subsequent
implementation of government restrictions, however, have led to a comparatively higher
than normal policy impact coefficient and lower than normal average fare and GDP
coefficients.
5. Conclusions
The COVID-19 pandemic has had a devastating impact on the global air transport
industry as governments around the world have imposed a plethora of restrictions that
have included suspending or severely limiting international flights, travel bans, lock-
downs, stay-at-home directives as well as quarantine rules to prevent the rapid spread of
the disease. These policies have had a negative catalytic impact as they have caused global
air travel to become severely curtailed to unprecedented levels as the pandemic produced
an average reduction in international traffic of around 66% in 2020 compared to the pre-
vious year, representing the largest shock to commercial air travel since World War II.
However, as levels of vaccination has gained traction across the world, there has been a
slow response in terms of traffic generation on international routes. This is a worrying
progression as the aviation industry remains in a continuous state of financial distress.
China has become the second largest air transport market globally after the US and was
the first market to be impacted by the pandemic. Therefore this market became the prem-
ise of this study as it was deemed to be an excellent template to extrapolate from, because
of its longevity in dealing with the virus when compared to other markets around the
world. The research sought to uncover how international traffic, flight frequency, fares
and revenues, including in premium and economy classes unfolded on Chinese interna-
tional markets at a granular level up from the start of the pandemic until the summer of
2021.
China produced a number of policy initiatives to restrain the spread of the infection,
including restricting the number of operators on a specific international route within a
defined period and applying severe penalties if COVID-19 cases were detected upon arri-
val. Depending on the international destination, China enforced bipartisan legislation that
either banned travel outright or enforced multiple negative tests before travel could be
undertaken. From an international perspective, this research has also provided evidence
of the impact of the Chinese policy environment on international seat capacity to and from
China.

Sustainability 2023, 15, 1525 21 of 24
The research produced a number of insightful findings. The implementation of the
so called Five one policy in March 2020 was associated with an almost immediate reduc-
tion in seat capacity on China to Europe, North America and rest of Asia markets to a high
degree of statistical significance and in the process partially suppressing the more typical
impact of underlying GDP and air fares in driving supply changes.
Smaller airports that traditionally had a lower number of flights when compared to
the incumbents of Beijing and Shanghai recovered much faster as these airports had a
much smaller proportion of international flights with Shenzhen and Guangzhou reaching
2019 flight levels by the following year. Shanghai’s second smaller airport Hongqiao fol-
lowed the same pathway. However, problems in recovering the number of flights at the
large Chinese hub airports that include Beijing, Shanghai Pudong and Hong Kong are
highly evident as these airports are dependent on connecting traffic and are the key gate-
ways to long-haul international destinations. Hong Kong International airport is the most
severely impacted as its domiciled Cathay Pacific has significantly curtailed its long haul
operations as the policy restrictions that were imposed by the Government over COVID
were even stronger than in mainland China.
The study also measured changes in the number of passengers, and revenues from
China to three international long-haul markets that comprised Europe, rest of Asia, and
North America. All markets experienced unprecedented and sharp reductions during the
early months of 2020. Still, the European and North American markets produced noticea-
ble increments in enhanced revenues by the summer of 2021, which was underpinned by
airlines charging higher airfares, as flights to Europe, for instance, had airfares that were
41% higher. A significant finding was the abrasive decline of premium classes in terms of
income generated. This trend is particularly concerning as premium classes are responsi-
ble for a significant proportion of overall revenues. Alarmingly, the rate of decline in busi-
ness class revenues were notably greater than in economy class. Premium traffic between
China and North America and Europe accounted for 52% of total revenues pre-pandemic,
but plummeted to around 30% by mid-2021. The widebody aircraft serving these markets
have sizeable premium classes equipped with top-end expensive products. Many of these
premium seats remained unfilled, with United Airlines, for example, generating just 31%
of its income from these premium seats between the US and China in the Summer of 2021,
while it garnered an impressive 61% back in 2019 from the same routes.
There was also a granular insight into the top 10 international carriers from China.
An interesting observation was the sizable shifts in airline market rankings in pre- and
post-pandemic periods, which took place between all three continents. Air China was the
largest carrier operating between its homeland and Europe in pre-pandemic times, but it
had become outmuscled by fourth placed Lufthansa by the Summer of 2021, despite a
hike in fares. Similarly, United Airlines had dominated the US-China markets but was
replaced by fourth placed Cathay Pacific by mid-2021. Policies offering solid financial sup-
port from respective Governments helped to change the status quo. The German Govern-
ment agreed to a €9 billion bailout to stabilise its flag carrier, Lufthansa in return for a 20%
stake [42]. This allowed it to retain its long haul schedule to key international markets as
other carriers pulled routes.
Regarding the disaggregated city-pair analysis, the most important city pairing in the
post pandemic world (summer 2021) was Hong Kong to London Heathrow despite it ex-
periencing a heavy drop in traffic, followed by Shanghai (Pudong) to Frankfurt, whose
markets retained the highest number of travellers and produced the most revenues, while
Beijing to Moscow collapsed. Well-established routes operating for decades seem to have
retained their rigidity, alas at a much reduced level, while thin routes and those that re-
quired passengers to connect at a hub were hit the hardest. It was a similar situation for
Chinese to North American routes, but were mostly bolstered by higher fare offerings.
The top 10 short to medium haul routes from China to the rest of Asia show the highest
paradigm reduction in passenger traffic, when compared to Europe and North America.

Sustainability 2023, 15, 1525 22 of 24
At the same time, the fares recorded between the city pairs were only marginally higher
in the post-pandemic timeframe.
There are limitations and various future research directions. The first is that no air
cargo data was captured in this analysis as the datasets did not provide this information.
If cargo was captured, then the dynamics of traffic and revenues would change consider-
ably and provide a much more holistic outlook. Future research should endeavour to in-
corporate this important revenue stream particularly for many Asian combination carri-
ers. Secondly, only the top 10 routes were analysed at the disaggregate level, and although
it represents a unique attempt at disaggregation, it would enhance the research further if
it had a broader coverage that potentially considered the top 50 routes. The dataset per-
taining to air fares was designed to mainly captured information pertaining to 2019 to
2020, however it was noted that air fares were substantially higher in the full 12 month
period of 2021 compared to earlier years when extracted from the Sabre database which
would have changed the outcome of the air fare data if extrapolated into 2021. Lastly, it
would add value to the overall academic literature if a network analysis was applied in
lieu of the COVID-19 pandemic i.e., to assess shifts in the number of direct versus con-
necting flights and to observe the mediating effect of average fare differences, particularly
as fear of disruption on premium connecting services may now be heightened as a result
of the pandemic.
Author Contributions: Conceptualization, A.G., D.W.-S., J.F.O. and M.E.; Formal analysis, A.G.,
D.W.-S., J.F.O., M.E. and X.Z.; Writing – original draft, A.G., D.W.-S., J.F.O., M.E. and X.Z.; Writing
– review & editing, A.G., D.W.-S., J.F.O., M.E. and X.Z. All authors have read and agreed to the
published version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: OAG data is unavailable due to privacy.
Conflicts of Interest: The authors declare no conflict of interest.
Appendix A
Table A1. Airlines Names for Airline Codes.
Airline Code
Airline Name
Airline Code
Airline Name
9C
Spring Airlines
FD
Thai AirAsia
AY
Finnair
HU
Hainan Airlines
BA
British Airways
HX
Hong Kong Airlines
CA
Air China
KE
Korean Air
CI
China Airlines
LH
Lufthansa
CX
Cathay Pacific
MF
Xiamen Airlines
CZ
China Southern
MU
China Eastern
EK
Emirates
OZ
Asiana Airlines
Table A2. Airport Names for Airport Codes.
Airport Code
Airport Name
Airport Code
Airport Name
AMS
Amsterdam
MUC
Munich International Airport
BKK
Bangkok
NRT
Tokyo Narita
CAN
Guangzhou
PEK
Beijing Capital
CDG
Paris Charles de Gaulle
PVG
Shanghai Pudong
FRA
Frankfurt International
SHA
Shanghai Hongqiao
HEL
Helsinki-Vantaa
SIN
Singapore

Sustainability 2023, 15, 1525 23 of 24
HKG
Hong Kong International
SVO
Moscow Sheremetyevo
ICN
Seoul Incheon
SZX
Shenzhen
KIX
Osaka
TAO
Qingdao
LHR
London Heathrow
TPE
Taipei
MNL
Manila
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