China's domestic airline capacity may only fully recover by end-June - OAG

By Stella Qiu and Jamie Freed

BEIJING/SYDNEY, April 27 (Reuters) - China's domestic airline capacity, which halved after a recent lockdown in Shanghai, is reviving slowly but a full recovery could take until the end of June, travel data firm OAG said on Wednesday.

Scheduled seat capacity in China rose 12.5% in the week to Monday from the previous week, OAG said, in a gradual recovery following the Shanghai lockdown that began in late March and has entered its fourth week.

However, the rise in capacity does not necessarily signal a quick return of demand, OAG Chief Analyst John Grant said.

"Chinese airlines have been extremely flexible in taking capacity out and putting it back in quickly," he said in a webinar. "To some degree, they don't really seem to care whether demand returns quickly or not, and it probably doesn't because of the natural conservatism about travelling when you come out a lockdown."

The outlook for next week's five-day Labour Day holiday in China is bleak. Daily COVID counts have declined in Shanghai, but the capital Beijing is grappling with new outbreaks that have led to mass testing and mobility curbs for some parts of the city.

Aviation data firm Variflight expects the average number of domestic flights across China will fall below 3,000 per day during the Labour Day holiday, up from a recent low of 1,670 flights on April 4, but still down over 70% from a year earlier.

Weekly flight numbers have begun to rebound, but they are still hovering around the lowest levels since 2003, Variflight said.

Analysts also expect a likely prolonged border closure until 2023, the expiry of passports held by Chinese travellers and economic concerns including a depreciating currency will weigh on the recovery of China's international aviation market.

The cloud over China's airline industry contrasts with optimism elsewhere in Asia, driven by the relaxation of travel restrictions after two years of lockdowns and strict border control measures.

Singapore has removed most remaining COVID-19 restrictions, while Thailand is set to scrap a mandatory on-arrival COVID-19 test for foreign visitors from next month. (Reporting by Stella Qiu in Beijing and Jamie Freed in Sydney Editing by Mark Potter)