The Chinese aviation industry, which ground to a halt when China limited travel both domestically and internationally in an early move to curb the coronavirus spread, has started showing partial signs of recovery.

But as the country faces an increasing number of imported cases, new regulations will kick in tomorrow limiting international flights - raising concerns about whether China's domestic market alone will be enough to keep carriers out of the red.

The Chinese aviation industry was hit hardest in mid-February with capacity down by up to 70 per cent from the same time last year, according to OAG Aviation data.

A report from Caixin put losses by China's six top publicly listed airlines at 22.3 billion yuan (S$4.5 billion) as of last week. Millions of trips have been cancelled and with the slowing economy, business travel is also being postponed because of cash-flow reasons.

To stem the bleeding, the Civil Aviation Administration of China (CAAC) earlier this month stepped in with a raft of measures ranging from financial subsidies for Chinese carriers to infrastructure development. Its 16 initiatives also included reducing take-off and landing charges as well as waiving parking fees, even as airliners added back some 2.9 million seats to capacity, hinting that recovery could be on the horizon.

However, China tightened the noose again to mitigate imported Covid-19 cases. Effective from tomorrow, all Chinese airlines will be allowed just one flight a week to each international destination, while foreign airlines like Singapore Airlines will be allowed only one flight a week into China.

The decision means that Chinese airlines will have only 107 international flights a week, while foreign airlines would be left with just 25 flights. A limit on passenger capacity at 75 per cent means international arrivals will be reduced from the current 25,000 a day across China to about 5,000.

But in the short term, the limit on international flights is unlikely to have any impact anyway, said independent aviation analyst Brendan Sobie, noting the lack of demand for international travel.

"The focus is now on a domestic recovery, as it should be. The China domestic air transport market started recovering a few weeks ago, and this recovery continues," he told The Straits Times.

With 733 million seats last year, China's domestic market is the biggest in Asia.

But with ever-changing travel restrictions in big cities like financial hub Shanghai and the capital, Beijing, it appears that domestic demand is still sluggish.

"I think what you can say is that there will surely be some latent demand, but that the market will need stimulating and confidence to be restored," said Mr Mayur Patel, regional sales director of OAG Aviation. He noted that before the coronavirus outbreak, there were 68 airports across the country under construction - an indication of how much China expects its travel market to grow.

Last year, during President Xi Jinping's visit to France, China agreed to buy 300 Airbus jets - 290 mid-range A-320s and 10 of the larger A-350s, an indication that it intends to upgrade the national fleet. But it is unclear yet which airlines will be assigned the jets.

Amid travel restrictions, airlines have been looking at new ways to cope: Unable to ferry passengers, many are now filling planes with cargo ranging from medicine to protective equipment to even smartphones. This comes as China has reopened its factories and there is surging demand for equipment to fight the pandemic.

But for the industry to stage a full recovery, it would also require international travel to be fully restored, which might take months yet. International travel last year was responsible for 103 million airplane seats.

Furthermore, with little competition, Chinese airlines tend to be reliant on government support, said analyst Saj Ahmad of StrategicAero Research.

"The real question is who the Chinese government wants to save in this crisis. It can't save everyone, and the reality is that the bubble of Chinese aviation has burst in a very big way," he said. "Patching up the hole in the ozone layer is a far easier task than the Chinese government has to reinvigorate its battered aviation scene."