British Airways cancel route to Chengdu
Poor performance cited, but experts say talks on subsidies failed
Starting in January, British Airways ( BA), one of the largest UK carriers, will suspend its services between London and Chengdu, the booming second- tier city in Southwest China’s Sichuan Province.
The route is the only nonstop flight between western China and London.
BA said that the move was decided because of poor performance.
However, insiders said that the reason was failed negotiations over subsidies between the local government and the carrier.
The suspension
BA started the route in September 2013, making Chengdu the airline’s fourth Chinese destination after Beijing, Shanghai and Hong Kong.
The route initially flew three times a week, then increased frequency to five times weekly in summer and three times weekly in winter.
In a note sent to the Global Times on Wednesday, BA said that “we regret that we have decided to suspend the Heathrow to Chengdu route. We have a proud tradition of flying to China, but despite operating this route for three years it is not commercially viable.”
The route’s final flight will be on January 13 departing from Chengdu.
“The quit shows the dilemma for the domestic airports to woo overseas carriers with subsidies,” Qi Qi, an associate professor with Guangzhou Civil Aviation College, told the Global Times on Thursday.
Qi said that local governments commonly attract overseas flights with subsidies in three- year renewable terms.
Generally, new overseas routes are subsidized to different degrees by local governments for three years, the Hainan Daily newspaper reported in March 2015.
A single carrier could enjoy a subsidy of 1 million yuan ($ 148,411) and 2 million yuan, respectively, when opening a route within Asia or across continents, through which the carrier could fly at least four times per week for one year.
“Sometimes, the subsidy could reach 1 million yuan for each intercontinental flight,” Lin Zhijie, a civil aviation insider, told the Global Times.
Insiders said that the Civil Aviation Administration of China, to support development, will subsidize carriers opening regional flights in second- and third- tier cities, and local governments will also subsidize the carrier through airports to drive the local economy.
When asked about rumors of failing to agree on subsidies, Richard Tams, executive vice president of Greater China with British Airways, said in an e- mail sent to the Global Times on Thursday that “we are not in a position to comment on such suggestion.”
Alongside BA, Virgin Atlantic Airways flies routes from the UK to China, with the two carriers operating up to 29 flights per week. In comparison, five carriers from China operate flights to the UK, with no more than 40 weekly departures between the two countries.
The dilemma
The announcement of cancelling the London- Chengdu route came days after the two central governments vowed to double flights between the countries.
According to the agreement, the two parties agreed to increase passenger flights per week from 40 to 100, without limit on cargo flights, and restrictions are to be lifted on airlines’ Chinese destinations.
Currently, overseas carriers are penetrating to China’s second- tier cities from first- tier cities, due to limited routes and a saturated market.
Local governments are welcoming the opening of new routes, as it could bring more trade and economic activities.
Take Chengdu as an example. In September, the city welcomed nine new intercontinental flights, and it is expected to have 19 nonstop interconti- nental flights next year, covering cities such as Paris, Prague and Madrid, and it plans to have 70 routes by 2020.
However, BA’s suspension of the London- Chengdu route also shows it is not easy for second- tier cities to accommodate intercontinental flights.
In 2013, there was a rumor claiming that Air France may suspend its route from Wuhan in Central China’s Hubei Province to Paris due to a poor performance, although the rumor was rebuffed by the local government as media reported that local government provided more subsidies to the carrier.
Beijing Business Today newspaper reported that in 2012 subsidies from 18 provinces totaled more than 600 million yuan, covering 107 international routes by 63 overseas carriers.
The suspension will unlikely have a heavy impact on the bottom line of either the airport or the carrier, Qi said. However, Qi noted that it’s possible that BA substitutes the route with the opening of a flight path with another second- or third- tier city, as higher subsidies win.
When asked if a route to another second- tier city could take the place of the London- Chengdu flight, Tams said that “BA recognizes the importance of China to the future of global aviation, and we always try our best to listen and respond to the local market needs. We continually review our route network.”