Flight reductions bad for China-Singapore ties

At first glance, the suspension of flights to two Chinese cities does not look like a big deal for Singapore Airlines Ltd. After all, Chongqing and Chengdu are not major routes for the renowned carrier that boasts 130 destinations around the world, but the move could put a dampener on one of the strongest friendships in the region.

From Sunday, services between the city-state and China’s fourth and sixth-largest metropolises are to be halted less than five months after they began, the Straits Times reported, citing a company spokesperson, who declined to elaborate.

The airline did not receive approval from the Civil Aviation Administration of China, the second time in a year that the company’s flights to the country have been interrupted by regulatory uncertainty, the Chineselanguage Singapore daily Lianhe Zaobao reported.

Last year, Korean Air Lines Co and Asiana Airlines Inc started severing routes to China. Those cuts were in part mandated by a planned merger between the two carriers, but also came amid increased tensions between the countries and ongoing limits imposed by China, including restrictions on group tourism.

Air China Ltd or Chongqing Airlines Co could pick up the vacated slots left by the recent suspension, Bloomberg Intelligence estimates.

Singapore Airlines would be fine. The two cities accounted for just 1 percent of its scheduled China seats in the first quarter, Bloomberg Intelligence analysts Tim Bacchus and Eric Zhu wrote. The suspension, which so far only applies to the summer and autumn flight seasons, might be temporary, they wrote.

However, the cancellations and the lack of clarity for why do not augur well for close links between China and one of its friendliest regional neighbors. As Asian nations, including Japan, South Korea and the Philippines, grow wary of Beijing’s expansion, Singapore has stood solid.

The importance of aviation links extends beyond merely shuffling passengers from place to place. They are a sign of political and economic ties. National airlines are called flag carriers precisely because of that symbolism.

In this context, the suspension of flights for any reason could only be seen as a step back, especially as foreign investors turn away from the world’s second-largest country. Inbound direct investment plunged 82 percent last year to the lowest in three decades. A slowing economy and higher interest rates overseas are just part of the problem. More broadly, geopolitical tensions and ongoing difficulties doing business in China

— including conducting research and due diligence — have made the risks not worth the diminishing rewards.

Singapore could help fill the gap. It is one of the largest sources of foreign direct investment into China and has maintained largely strong ties across tourism, commerce and finance.

However, minor hiccups, like cancelled flight schedules, reduce certainty and increase the opacity.

That means carriers which are struggling to boost capacity due to a shortage of pilots, ground staff and planes, would need to rethink how highly they prioritize Chinese destinations in route planning.

India is becoming a major aviation market and will becomeing a growing destination for international flights. New Delhi has earmarked US$11 billion for new aviation infrastructure, with a plan to increase the number of airports by one-third of the next five years.

Meanwhile, growing trade and tourism within Asia makes the likes of Vietnam, Japan and Taiwan more attractive, and if Beijing decides to prioritize local carriers when allocating slots, then foreign airline executives would surely start to take the hint and send their aircraft elsewhere.

Carriers plan their routes and capacity years in advance, and with escalating costs they are unlikely to allocate resources to places where they start to feel unwelcome.

As the most powerful symbol of its nation’s goodwill, and brand, Singapore Airlines would brush off this setback with ease. However, relations between China and Singapore could do without the extra friction.

Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.