A significant document has been released, potentially reshaping the landscape of local aviation hubs.

In addition to 10 international aviation hubs, a large number of cities' international routes are hanging by a thread, facing the embarrassing situation of imminent suspension.

Recently, the Civil Aviation Administration and the National Development and Reform Commission jointly issued the "Guiding Opinions on Promoting the Construction of International Aviation Hubs," confirming the "3+7+N" development pattern of international aviation hubs.

This document categorizes China's aviation hubs into four types: The first category is "3," namely Beijing, Shanghai, and Guangzhou.

Their positioning is as "all-round gateways" of international aviation hubs, which will strengthen intercontinental connectivity and global radiation capabilities, supporting the construction of the "Silk Road in the Sky," and are the most important.

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The second category is "7," distributed across the country, including Chengdu, Shenzhen, Chongqing, Kunming, Xi'an, Urumqi, and Harbin.

Their positioning is as "regional gateway" international aviation hubs, which will build international route networks with regional advantages.

The combination of "3" and "7" forms the ten most important international aviation hubs in China, entrusted with the most important international exchange missions by the state.

The third category is "N," belonging to regional aviation hubs, positioned to connect the ten international aviation hubs and actively expand international air transport networks facing specific regions.

It can be understood as having partial international aviation functions.

A total of 12 cities have been "named," namely Dalian, Nanjing, Hangzhou, Hefei, Fuzhou, Xiamen, Jinan, Qingdao, Wuhan, Changsha, Nanning, and Haikou.

The fourth category is aviation cargo hubs, with the document mentioning Ezhou, Zhengzhou, Hefei, and Tianjin, all of which are aviation logistics centers.

On the basis of a clear positioning, the document proposes an unprecedented statement that will determine the fate of many cities' international routes: international routes connecting other airports besides international hub airports, local governments are not allowed to arrange route subsidies.

This means that, apart from the ten international aviation hubs in "3+7," local governments of other cities can no longer arrange international route subsidies, and the route arrangement is entirely determined by the market.

A large number of cities' international routes are hanging by a thread.

In fact, recently, more and more airlines are withdrawing from the Chinese market.

On September 10, AirAsia Philippines announced that due to low demand for services, it will stop all flights from Manila, the capital of the Philippines, to Mainland China this year and turn to the Japanese market.

Earlier, British Airways, Virgin Atlantic, Royal Brunei Airlines, Qantas, and KLM Royal Dutch Airlines all announced their withdrawal from the Chinese market.

The three major American airlines—United Airlines, Delta Air Lines, and American Airlines—are also reducing flights.

Why are they all suspending flights to China?

The fundamental reason is that demand has decreased.

International flights are increasingly difficult to make money.

The occupancy rate of international flights in many domestic cities is also declining, in a state of "not being able to be satisfied."

Taking Nanjing-Sydney as an example, according to Luoxing Tianxia, the average occupancy rate of this route has been fluctuating around 50% for many years, and the highest year, 2020, was only 60%.

Industry experts have calculated that the minimum occupancy rate for China's civil aviation industry to make a profit is exactly 60%.

In addition to Nanjing, in March of this year, the occupancy rate of passenger flights from Qingdao, Wuhan, Hangzhou, and other cities to Sydney was all below 50%, and Jinan-Sydney was as low as 26.8%!

It is a veritable "empty chair route."

Once the passenger volume is insufficient, "flying one flight, losing one flight" is not an exaggeration.

Since the demand is insufficient, why do many cities still insist on it, even at the expense of subsidies, to continue to open international routes?

As of September 6, 2024, all international routes with domestic flight points on flightconnections, excluding Hong Kong, Macao, and Taiwan and the 10 hub cities, have a total of 280 routes, involving 48 cities.

Among them, Hangzhou has the most with 22 routes, followed by Xiamen (21), Haikou (18), Qingdao (15), Nanjing (14), and Zhengzhou (14).

Just in the past August, the Civil Aviation Administration also approved 307 international route passenger flight applications submitted by domestic airlines from non-first-tier cities, including Hangzhou-Seoul, Wuxi-Tokyo, Ordos-Jeju, etc.

Many of the international routes in various places were built in the round of "aviation leap forward" before the epidemic, in order to create a city card and improve the "international level."

An airport spokesperson once said, "A second-tier city can have a direct flight to Europe and America, which has a positive effect on both external publicity and attracting foreign investment."

Data from the Centre for Asia Pacific Aviation (CAPA) shows that from 2007 to 2013, Chinese airlines opened 24 intercontinental routes, but in the five years from 2014 to 2018, the number of intercontinental routes opened by Chinese airlines reached 78, more than quadrupling the number.

Civil aviation expert Lin Zhijie has calculated the speed of opening international routes in second-tier cities in those years: In 2013, there was no direct flight from second-tier cities to the United States, but the development in the following years was astonishing.

In 2015, the passenger volume of intercontinental routes in second-tier cities increased by 310%, while the three hubs increased by 16%; from 2016 to 2018, the routes in second-tier cities always maintained a doubling of growth every year, while the growth rate of the three hubs has dropped from 24% in 2016 to less than 2% in the past two years.

An official of the Chengdu municipal government even said in 2013, "Our plan is to open more than 3 international routes every year."

So many international routes, when faced with insufficient demand, rely on what to maintain?

It is very important to have local subsidies.

According to incomplete statistics, in 2016 and 2017, the total amount of route subsidies paid by the Chinese government and the Civil Aviation Administration exceeded ten billion yuan.

A typical case is Qingdao.

In 2016, Qingdao City clearly stated that new direct flights to Asia (regions) would receive subsidies ranging from 30,000 to 80,000 yuan per flight according to factors such as aircraft type and whether they are regular flights.

The city's 2017 municipal special fund budget arrangement showed that the four intercontinental routes to Frankfurt, San Francisco, Vancouver, and Melbourne received a total of 497 million yuan in subsidy funds.

By April 2022, the subsidies were upgraded.

Qingdao City announced that during the "14th Five-Year Plan" period, the city will invest 5 billion yuan in fiscal subsidies for the aviation industry, and "enhancing intercontinental and long-haul international connectivity" is an important part of it.

Now, under the guidance of the new policy, Qingdao's local subsidies may have to be completely stopped.

Another example is Xiamen.

In February 2023, Xiamen City proposed that for new regular routes to Asia, subsidies ranging from 60,000 to 120,000 yuan per flight will be given according to different flight distances, with a maximum limit of 10 million yuan per year; for new intercontinental regular routes, subsidies ranging from 820,000 to 1.06 million yuan per flight will be given according to different flight distances, with a maximum limit of 110 million yuan.

Even passengers on international flights have special subsidies.

Government subsidies distort the market mechanism and also bring some hidden dangers.

For example, as China's largest low-cost airline, route subsidies once accounted for more than half of the net profit of the listed company of Spring Airlines.

In 2017, during the IPO review, it was also questioned by the China Securities Regulatory Commission for "serious dependence on government subsidies and routes for profitability."

Now, even if the state does not intervene to rectify, this "local subsidy" model is gradually becoming unsustainable.

Routes that can barely operate with government subsidies are very vulnerable to any changes.

In 2013, a foreign airline's management said publicly that before deciding to open a route to a western city, the local government promised strong support in tax incentives and flight subsidies, which can basically cover about 30% of the costs, which is an important reason for the company's final decision to open the route.

However, "if the route cultivation cannot turn a profit within three years, it may still be canceled after three years."

Recently, Happy Air has taken the Development and Reform Commission of Alxa League in Inner Mongolia Autonomous Region to court, and in 2023, Juneyao Airlines also sued three local government departments and state-owned enterprises in Hebei, Yunnan, and Guangxi, all related to cost issues and overdue subsidies.

Localities really can't afford to spend money anymore.

Now, with the state's intervention, such a distorted market pattern will be accelerated to adjust, bringing a certain impact.

The "Guiding Opinions on Promoting the Construction of International Aviation Hubs" clearly proposes to: carry out a review of the legality of international route flight subsidies to prevent some subsidy practices from disrupting China's international air transport policies and fair competition market order.

In connection with the "Fair Competition Review Regulations" issued by the State Council before, it can be seen that this opinion from the Civil Aviation Administration is also a reflection of the "national unified large market" in the field of air transport.

The indiscriminate opening of international route subsidies can easily evolve into local protectionism, affecting fair market competition.

No matter how you look at it, the state's intervention in rectifying route subsidies is a good thing.

After all, that subsidy is spent on taxpayers' money.