(Bloomberg) — Air-France KLM is lobbying the French government to cap the number of flights that mainland Chinese carriers can make to Europe, according to people familiar with the matter, in a bid to protect European airlines from unfair competition.
Most Read from Bloomberg
The Paris-headquartered airline group’s requests may involve asking for a stay in the current air traffic rights between France and Asia’s biggest economy, some of the people said, asking not to be identified because the discussions are private.
Deutsche Lufthansa AG meanwhile is pushing for Germany’s government to take the lead in challenging Beijing over the issue of distorted rivalry, another person said.
Lufthansa has already said it will pare back services to China, planning to scrap its direct daily flight from Frankfurt to Beijing at the end of this month because, amid jet shortages, it’s having to deploy fuel-guzzling, older aircraft on that route, making it unprofitable.
Such machinations expose the disagreement between European carriers on how best to curb the rising number of flights from China by Chinese carriers that take shortcuts over Russian airspace, shaving precious hours off long-haul travel, and offer much cheaper ticket prices. There’s some debate about whether to involve national governments or just elevate the matter to Brussels, the de facto capital of the European Union, the people said.
Representatives for Air-France KLM and Lufthansa didn’t respond to requests for comment.
More broadly, Europe’s relationship with China is being buffeted by worsening trade tensions, as the EU seeks to target what it says are unfair subsidies and other support that Beijing provides to its companies. The bloc is imposing tariffs on Chinese-made electric vehicles, while China is threatening to retaliate against imports of brandy and large-engine vehicles.
KLM Chief Executive Officer Marjan Rintel spoke out earlier this month, urging European Union action against “unfair” Chinese competition, WNL TV reported. “Europe can at least look at how we can prevent that unfair playing field by pricing it or looking at it in a different way,” Rintel said.
Europe’s airlines haven’t flown over Russia since the beginning of Moscow’s invasion of Ukraine in late February 2022. Ukraine’s airspace has also been closed since then. That’s given Chinese rivals a distinct advantage in terms of costs and hours in the air.
It’s not the first time legions of flights from China have rankled other countries. The US took action during Covid to curb the glut of Chinese airlines flying into the country with unfettered access while US carriers were being stymied, resulting in authorities on both sides capping flight numbers.
Lufthansa has said that it’s losing as much as half a million euro ($550,000) on every one of its soon-to-be defunct Frankfurt to Beijing flights. The three biggest Chinese airlines meanwhile have pulled in 111.1 billion yuan ($15.7 billion) in subsidies or government grants aimed at encouraging them to operate air links, the carriers’ annual reports show.
Lufthansa and Air France-KLM do typically also codeshare on flights to China with Air China Ltd. and China Eastern Airlines Co., and Shanghai-based China Eastern holds a 4.7% stake in the Franco-Dutch airline group.
However Air France-KLM and China Eastern suspended their codeshare partnership over the pandemic when international travel dried up and never restarted it, one of the people said.
British Airways and Virgin Atlantic Airways Ltd. have also eliminated some China routes, with Virgin suspending flights between London Heathrow and Shanghai from October.
In the aftermath of Covid, European carriers were slow to restore flights to China, largely because of lackluster outbound demand from Europe. Chinese carriers however added many flights, well beyond 2019 levels, and are offering highly competitive air fares.
By the end of the year, Chinese airlines will comprise roughly 75% of seat capacity on all flights to and from Germany and France to China, data from aviation firm Cirium show. And they’ll have 100% of the market on trips to Italy and a 95% share of flight capacity to the UK.
–With assistance from William Wilkes, Jinshan Hong, Josh Xiao and Albertina Torsoli.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
