Whalesbook
Flights Resume: Restoring Key Air Routes
Air China has restarted its Beijing-Delhi service, flying Tuesdays, Fridays, and Sundays. This follows China Eastern Airlines' resumption of the Kunming-Kolkata route on April 18 and IndiGo's launch of Kolkata-Shanghai services on March 29. These flights restore vital air connections, repairing a network disrupted by the COVID-19 pandemic and the 2020 border clashes. Officials state the resumption aims to boost trade, tourism, and exchanges, signaling a desire to stabilize ties.
Economic Ties Warm Alongside Aviation Revival
This aviation restart is closely linked to warming economic ties. China is again India's largest trading partner for fiscal year 2025-26, with trade at $151.1 billion. However, India's trade deficit with China grew to $112.16 billion. In March 2026, India's cabinet eased foreign direct investment rules for China, removing prior approval for non-controlling stakes in key sectors. This aims to draw Chinese investment and support India's manufacturing. India's upcoming BRICS presidency in 2026 also signals ongoing cooperation.
Airlines Navigate Demand and Financial Pressures
IndiGo, India's leading airline with about 64% of the domestic market, is growing its China routes. April data shows strong demand on these flights, with passenger loads between 68% and 85%. This demand contrasts with the financial health of major Chinese airlines. Air China had a market value of $11.6 billion and a negative P/E ratio (-44.33) in April 2026, receiving a 'strong sell' rating from Zacks Research in March. China Eastern Airlines also reported a negative P/E ratio (-50.7) in March 2026. The wider Asia-Pacific aviation sector is expected to grow 7.3% in 2026, with India and China leading. India is projected to be the world's third-largest aviation market by 2026. However, ongoing supply chain issues and staff shortages are pushing load factors up, which supports ticket prices but limits growth.
Persistent Challenges in Bilateral Ties
Despite signs of renewed cooperation, significant challenges remain. Chinese state-owned airlines like Air China and China Eastern face financial difficulties, reporting large losses and negative P/E ratios. Analysts have a consensus 'Sell' rating on Air China. India's trade deficit with China continues to grow, with imports far exceeding exports. Underlying issues, such as border disputes and power imbalances, persist despite diplomatic efforts. The global aviation sector also grapples with ongoing supply chain problems, staff shortages, and the economic effects of conflicts. India's dependence on Chinese manufactured parts and supply chains remains a key challenge, even as it tries to diversify.
Future Outlook: Growth Amidst Complexities
Analysts expect strong passenger traffic growth in Asia-Pacific through 2026, with India and China leading the way. India's aviation market is set for substantial growth, fueled by its rising middle class and infrastructure projects. The shift in bilateral ties, shown by relaxed investment rules and closer ties within BRICS, points to a practical management of their complex relationship. However, future progress depends on Beijing's willingness to consider India's strategic interests, a matter complicated by ongoing mistrust and regional rivalries.