(Bloomberg) -- China Eastern Airlines Co. is pulling its twice-weekly flight from Wenzhou to Madrid at the end of this month as the country’s aviation officials crack down on subsidies underpinning international flights from smaller cities.
The carrier has stopped accepting bookings for the route, which started in November last year, its website shows. While Wenzhou, about 460 kilometers (285 miles) south of Shanghai has a population of 9.8 million — larger than New York City — its airport doesn’t offer a vast range of international flights, with only services to Rome, Milan, Tokyo, Seoul and Bangkok left.
China Eastern Airlines didn’t respond to a request for comment.
International flights from mid-tier Chinese cities are coming under scrutiny as the Civil Aviation Administration of China seeks to reign in services that may only exist because they’re heavily subsidized. Such flights have long been possible because local governments, in an effort to shore up regional tourism, have offered Chinese carriers financial incentives to serve their cities.
Indeed from 2014 to 2023, China’s top three airlines, including Air China Ltd. and China Southern Airlines Co., amassed some 111.1 billion yuan ($15.7 billion) in subsidies or government grants aimed at encouraging them to operate air links, the carriers’ annual reports show.
There’s concern those payments mask the efficiency, or lack thereof, of some weaker airports and routes in China, undermining the robustness of the nation’s aviation sector more broadly.
Yunnan province in China’s southwest, for example, has offered incentives of up to 20 million yuan an airline to subsidize international flights, provided those carriers hit certain passenger metrics.
Guidance issued by the CAAC at the end of August sets out rules that propose subsidies be scaled back to just a handful of major Chinese airports. They also suggest international flights should be concentrated around the busiest and biggest cities of Beijing, Shanghai and Guangzhou.
A review into the legality of some international flight route subsidies is also planned, the CAAC document shows.
A closer look into the subsidies local governments are paying to carriers comes as some Chinese airlines have been putting on more loss-making overseas services to Europe as European airlines pull out of Asia’s biggest economy.
With demand for travel into China slipping, Lufthansa, British Airways, Virgin Atlantic Airways Ltd. and Qantas Airways Ltd. have all pulled back or withdrawn services. European carriers have also raised concerns about Chinese airlines’ use of Russian airspace to save time and fuel, and therefore offer much cheaper flights to the continent.
--With assistance from Josh Xiao and Linda Lew.
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