For Beijing, the impact of vanishing loads is intensified by decisions it took seven years ago, when it tried to fashion three national champions from an industry-wide restructuring. But the mergers, based on three regional airlines and their respective hubs in Beijing, Shanghai and Guangzhou, were done on geo-political rather than commercial grounds. The trio inherited incompatible fleets and even more incompatible management. China Eastern, the weakest of the three, lost money even when volumes were growing at up to 20 per cent a year.
As banks have baulked at financing airlines except on a short-term basis, the state is supporting its champions directly. Eastern and Southern have won bailouts totalling $1.5bn to pare debts and pay bills; on Monday, Eastern secured another $300m in new equity. Air China, the most profitable operator, was forced last week to deny that it, too, had gone cap in hand.
Industry overcapacity, with more than two dozen other airlines underneath the bigger three, is crippling yields: Ctrip.com, China's largest online travel agent, reports that average air ticket prices in January – the season of peak demand – fell between 10 and 15 per cent. Beijing has scrapped fuel surcharges and banned new entrants until 2012, but is running out of emergency options. A fresh, more intelligent round of forced consolidation beckons. Shanghai – the only major market not dominated by a single carrier – seems a good place to start.