China’s main state-owned airlines posted losses in the first half of the year, pressured by a slower-than-expected recovery in international tourism, domestic oversupply and fiercer competition as airline capacity returns globally. China’s three largest airlines – Air China, China Southern Airlines and China Eastern Airlines – last reported annual net profit in 2019 before the COVID-19 pandemic broke out.
Shanghai-headquartered China Eastern on Friday reported a first-half loss of 2.8 billion yuan ($395 million), compared with a loss of 6.2 billion in the same six months last year.
“Ticket prices in the domestic market have fallen year-on-year… due to increased competition in the domestic passenger transport market, the slower-than-expected recovery of some international markets and competition from high-speed rail,” it said in a file.
The country’s flagship carrier Air China posted a net loss of 2.78 billion yuan in the first half, narrower than a loss of 3.45 billion in the same period last year, it said Thursday. China Southern Airlines reported a net loss of 1.23 billion yuan in the first half, compared with a loss of 2.9 billion a year earlier. The Guangzhou-based airline posted a profit of 760 million yuan in the first quarter.
Air China said international traffic grew in the first half, with passenger numbers above 80 percent of pre-pandemic levels in 2019. But it said its traditionally “low-cost” North American routes were slow to recover. Flights between China and the United States have been held up by political issues and low demand and are at about a fifth of what they were in 2019, according to flight schedule data from Cirium and China-based aviation data provider VariFlight. “As international routes are not fully resumed, widebody aircraft are being used domestically, increasing oversupply,” Air China said.
Outbound travel from China has grown since pandemic-related restrictions were lifted as 2023 began, but the recovery in foreign travel has lagged behind market expectations due to a faltering economy and a turn to domestic travel. There were 23 percent fewer flights from China in July than the same month in 2019, while the number of domestic flights was 15 percent higher, Cirium data showed, even as Chinese airlines are gaining market share internationally against foreign rivals.
Airlines around the world are seeing fares and profitability fall as planes return to the skies and the global imbalance between seats and travel demand levels out. HSBC analysts said in a June note that they expected outbound travel to China to continue to recover as air capacity and visa requirements improve, “but the domestic travel market may come under pressure as tourists head abroad” .
Air China and China Southern this week became the second and third Chinese airlines to operate the Chinese COMAC C919 passenger aircraft.
