Losses for China’s State-Owned Airlines
BEIJING (Reuters) – China’s leading state-owned airlines reported losses in the first half of the year due to slow recovery in international travel, domestic oversupply, and heightened competition as global aviation capacity resumes.
China’s top three airlines – Air China, China Southern Airlines, and China Eastern Airlines – last reported annual net profits in 2019, before the COVID-19 pandemic disrupted the industry.
Financial Performance
China Eastern Airlines
- Loss: 2.8 billion yuan ($395 million) in the first half, improved from a loss of 6.2 billion yuan in the same period last year.
- Reported decreased ticket prices in the domestic market due to intensified competition and lower-than-expected recovery of international markets.
Air China
- Loss: 2.78 billion yuan, narrower than the 3.45 billion loss in the same period last year.
- International traffic grew above 80% of pre-pandemic levels, but recovery of North American routes is slow.
China Southern Airlines
- Loss: 1.23 billion yuan, improving from 2.9 billion loss last year.
- Made a profit of 760 million yuan in the first quarter.
Challenges in International Travel
- Flights between China and the U.S. remain constrained by political issues and low demand, at just 20% of 2019 levels.
- Air China indicated that domestic use of wide-body planes contributes to oversupply due to unfulfilled international routes.
Outbound Travel Trends
- Outbound traffic has been growing since early 2023, but the recovery is slower than expected as the economy falters and domestic travel is prioritized.
- In July, there were 23% fewer flights out of China compared to July 2019, while domestic flights increased by 15%.
Global Aviation Market
- Airlines worldwide are experiencing decreased fares and profitability as the number of available seats continues to outpace demand.
- HSBC analysts predict continued recovery for China’s outbound travel as air capacity and visa requirements improve, although domestic tourism may face challenges.
Recent Developments
- Air China and China Southern have begun operational flights with China’s homegrown COMAC C919 passenger jet.
(Note: $1 = 7.0870 Chinese yuan renminbi)
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