China: The Unanswered Question In Delta Air Lines’ Recovery

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Atlanta-based Delta Air Lines held its fourth-quarter earnings call this week. Discussing various parts of the recovery, Delta’s executives were asked about China and how the airline was planning for the recovery in this crucial geography. While there is still continued uncertainty over travel regulations in China, the airline’s executives expressed an interest in staying with the market and seeing how it develops in the recovery.

Delta Airlines Aircraft At Sydney Airport
Delta will keep flying to China, but it is wary about adding more capacity as the demand environment remains quite weak. Photo: Getty Images

Delta Air Lines talks about China

Delta’s CEO, Ed Bastian, was asked about the recovery and how the airline was thinking about China, which, as it stands, is a relatively small piece of the network:

“It’s been interesting as we’ve watched a lot of the nations around the world all manage it seemingly somewhat differently. As it relates to us, you’re right. China is not a big part of our network. We’d like it to be a bigger part, but it historically hasn’t been. And it’s going to be a pretty small part of our network at least for the next couple of years. We’ll see beyond that.”

The reason Delta is keeping China small is largely because of the current demand environment. As a result of strict travel restrictions, there is not a lot of demand between the US and China beyond a few flights per week, though cargo has been strong in the market.

DL A330neo
Delta is keeping its toes dipped in the market, but it is a significantly reduced schedule compared to what the airline flew pre-crisis. Photo: Vincenzo Pace | Simple Flying

Mr. Bastian continued, urging that countries start to utilize the tools and technologies out there to manage the health situation and move toward a broader reopening.

Delta keeps China on its network

Delta will still keep flying to China, albeit with a stop along the way. As a result of complicated entry restrictions, including a willingness to almost instantaneously change requirements that led to the headline-making flight where a Delta flight turned around due to a change in requirements midflight en route to China, Delta has been relatively pessimistic on the rebound for travel to China in the near future.

Delta will continue to fly to Shanghai (PVG) with a stop in Seoul (ICN). It will offer flights from its transpacific hub in Seattle (SEA) and Detroit (DTW), which serves as Delta’s eastern US gateway to China. Even then, Delta will offer less than daily service to China, again, largely as a function of demand. Moving forward, Delta will continue to evaluate its China network as it relates to demand.

China: The Unanswered Question In Delta Air Lines’ Recovery
Historically, Delta flew several daily nonstop flights to China from the United States. Photo: Getty Images

Why China is important to Delta

Pre-pandemic, China was a fast-growing market of air travel. With growing business ties between China and the United States and an increase in demand, US airlines started to add flights to China and grow their transpacific presence.

In addition to being a prominent business market, another key aspect is the partnerships it has developed in the region. In mainland China, this is primarily with China Eastern Airlines, which has its primary hub in Shanghai (PVG). Here, passengers will be able to take advantage of connections into China and places like Beijing that Delta is not serving.

China Eastern Airlines Airbus A330
China Eastern remains an important partner for Delta. Photo: Getty Images

Historically, Shanghai received a significant amount of attention from Delta. In addition to Seattle and Detroit, Delta also flew to PVG from Los Angeles (LAX) and Atlanta (ATL). These flights are expected to come back as demand warrants. Delta had also been hoping to launch a Minneapolis (MSP) to Shanghai flight. Adding these flights helps Delta provide more flight itineraries and destinations in China that might not warrant nonstop aircraft from the United States. The move is about shoring up the airline’s market presence while also supporting the partnership between the two airlines.

China: The Unanswered Question In Delta Air Lines’ Recovery
The story in China revolves around one key factor: demand. Photo: Vincenzo Pace | Simple Flying

China Eastern is an equity partnership. Delta has a 3% stake in China Eastern. However, in Seoul (ICN), Delta’s joint venture partner, Korean Air, has a hub. Korean also has a sizable presence in China and will be the primary way for Delta to offer more comprehensive service to the country until restrictions ease. As China stays an integral part of Delta’s network, the airline will closely be watching demand but do not expect any significant growth to come until after demand materializes.

Source: https://simpleflying.com/delta-air-lines-china-recovery/

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