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Chinese Government Subsidizes International Flights to Keep Trade Alive

by Ker Zheng

The Chinese government announced on March 24th that it would issue special measures and dole out subsidies to airlines who continue to fly international flight routes to and from China. The measures were announced to keep the flow of international cargo going, as global trade is a vital sector for the Chinese economy. 

This comes as international airlines continue to cut flight capacity amidst global coronavirus developments. Prices for cargo transport have increased multifold and freight forwarders are reportedly updating quotes by the hour in response to fluctuating supply. Many passenger airlines are converting fligihts to all-cargo flights as consumer demand declines.

In China, the government will extend flight hours for all-cargo flights and implement 24-hour customs clearance channels for major cities and regions. These include Beijing, Tianjin, Hebei, the Yangtze River Delta (region around Shanghai), Guangdong province, Chengdu, Chongqing, and Hong Kong/Macao. 

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Secondly, the government will invest heavily in upgrading airport facilities and technology platforms so that they can better exchange information with airlines, postal services, cargo terminals, etc. More money will be invested in freight airports. 

Additionally, the government will also subsidize international passenger flights to and from China going forward. In general, around half of the world's air cargo volume is transported in the cargo holds of passenger flights; this number has steadily increased since the global financial crisis in 2008.

The subsidies are as follows

 - 0.0176 RMB per seat-kilometer for normal flight routes

 - 0.0528 RMB per seat-kilometer for exclusive flight routes

This means that a 450-seat Boeing 747 airplane flying a 11,000 km flight from Beijing to New York would receive roughly 87,000 RMB (US$12,240) if it was a normal route, and 260,000 RMB (US$36,582) if it were an exclusive route. 

Exclusive flight routes refer to routes that are only flown by one airline. In the past, the Chinese government only allowed one of the three major Chinese airlines (Air China, China Eastern, China Southern) to own international flight routes, i.e. China Eastern couldn't fly Beijing-New York routes if Air China was already flying it. This rule has since been relaxed but there are still many routes that are owned by one airline. 

Other measures include the reduction of airport fees. For first-class and second-class airports in China, take-off and landing fees will be reduced by 10%, and parking fees will be eliminated altogether. Air route fees will be reduced by 10%. The benchmark price of kerosene for domestic flights for domestic airlines will also be reduced by 8%. 

As of March 23-29, 101 international destination cities still have flights to and from China, averaging 1,073 passenger flights and 930 all-cargo flights per week. Chinese airlines are accounting for 74% and 38% of passenger and all-cargo flights, respectively. 

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