Trouble For US Airlines: China Demand Slump, Boeing Strike, Global Carriers Shifting Focus

As global airlines navigate shifting demand and rising operational costs, many are scaling back flights to China or pulling out entirely.

According to CNBC, Virgin Atlantic and Scandinavian Airlines have withdrawn from the Chinese market, citing high costs on extended routes and reduced demand.

Following the closure of Russian airspace, European carriers face increased expenses on longer routes to Asia, while Chinese airlines, unaffected by these restrictions, maintain direct and cheaper flights.

In response, European airlines are reallocating resources to more profitable routes. British Airways, for instance, has seen higher load factors on flights to Cape Town compared to those to China, CNBC writes.

While the closure of Russian airspace adds costs, weak demand stemming from China's economic slowdown and limited international interest in travel to China has also prompted these shifts.

A few days ago, reports emerged that China plans to issue 6 trillion yuan ($850 billion) in special treasury bonds over the next three years to stimulate its slowing economy and help local governments manage hidden debt.

While hints of fiscal support initially lifted investor sentiment, the absence of a comprehensive economic package has disappointed traders, leading to a recent downturn in U.S.-listed Chinese stocks.

U.S. airlines are also scaling back services to China but maintain minimal routes to preserve market presence.

Chinese carriers are near pre-pandemic capacity internationally (90%), while foreign airlines have reduced to 60% of 2019 levels, often attributing this to overcapacity and competition.

Meanwhile, Middle Eastern carriers, such as Emirates and Gulf Air, continue expanding routes to China, while flights from India and the U.S. remain limited due to political and regulatory challenges.

With demand low and facing route restrictions, U.S. airlines have redirected capacity within the Asia-Pacific region, urging the U.S. government to cap Chinese carriers' access and restore competitive balance, mentioned Asia Financial.

The trouble for U.S.-based carriers doesn't end at low demand from China. The structural issues with Boeing Co. BA have led to delayed aircraft deliveries, affecting capacity expansion.

Also Read: Boeing Reports $6B Q3 Loss: ‘This Is The Bottom,' Says Analyst

Southwest Airlines Co. LUV shares fell Thursday despite the airline reporting better-than-expected third-quarter earnings and reaching a pivotal agreement with activist investor Elliott Investment Management.

While the Elliott deal resolves internal management issues, Southwest still faces external challenges related to the Boeing strike. Southwest CEO Bob Jordan told CNBC that the ongoing strike at represents a potential risk to aircraft deliveries planned for 2025.

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