China Eastern Airlines will cancel its twice-weekly flights from Wenzhou to Madrid at the end of October due to the impact of Beijing’s review of local government subsidies for the aviation industry. The route was opened for booking only last November.
Wenzhou, located about 460 kilometers south of Shanghai, has a population of 9.8 million, even larger than that of New York City. Despite this, there are not many international flights available in Wenzhou, with current services only to Rome, Milan, Tokyo, Seoul, and Bangkok.
The airline did not respond to requests for comment from Bloomberg.
According to Bloomberg, the Civil Aviation Administration of China (CAAC) is reviewing international flight operations in small and medium-sized cities that heavily rely on subsidies to survive. Local governments have long provided financial support to such flights in hopes of boosting local tourism through air transport.
From 2014 to 2023, annual reports from China’s three major airlines (including Air China and China Southern Airlines) showed that they received a total of around 111.1 billion yuan in government subsidies to encourage operation of routes.
Yunnan Province provides up to 20 million yuan in incentives to each airline to subsidize international flights, but these airlines are required to meet a certain passenger threshold.
At the end of August, the CAAC issued regulations recommending a reduction in subsidies, focusing only on a few major airports, and suggested that international flights should be concentrated in the busiest and largest cities such as Beijing, Shanghai, and Guangzhou. The document also plans to review subsidies for some international routes.
With European airlines withdrawing from routes to China, some Chinese airlines are trying to fill the gap by opening more overseas routes to Europe. However, many of these routes are unprofitable or operate at a loss, relying on subsidies from local governments.
If central authorities review local government subsidies, smaller airports may face trends of closure or layoffs, as those airports and routes that lack efficiency and have poor operational capabilities heavily rely on local government subsidies.
It has been reported by the Epoch Times that the anti-corruption campaign of the Chinese Communist Party has recently started impacting the civil aviation system. So far, dozens of civil aviation officials across various regions have been investigated, involving airport operations. It is reported that the airport system is a primary target of the crackdown.