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While air traffic in China has seen a strong recovery year on year with a 312 percent increase in domestic flying in May, this is not immediately reflected in the financial results of the major Chinese carriers. China Eastern, China Southern, and Air China all issued profit warnings last week, although their financial position has much improved over last year. China’s Big Three not out of the woods yet.
Monthly IATA figures released on July 5 showed that domestic revenue passenger kilometers (RPKs) for May exceeded 2019 levels by 7.8 percent. Capacity was up 24.4 percent on May 2019. Asia Pacific airlines including Chinese carriers saw a 156.7 percent increase in international RPKs year on year, leading the growth among all regions. Capacity grew by 136.1 percent.
Indeed, China Eastern Airlines says it carried 51.9 million passengers in HY1, up 178.3 percent over the same period of 2022. Capacity recovered to 81.2 percent of 2019 levels as the airline resumed operations on numerous domestic and international routes. According to preliminary calculations, the carrier recorded a net loss of RMB -5.5 to -6.9 billion. However, this is a significant improvement over last year, when China Eastern reported a RMB -18.7 billion net loss.
Oversupply
China Southern Airlines expects a net loss of RMB -2.5 to -3.3 billion, which compares to RMB -11.5 billion last year. While recovery of domestic traffic has been constant since the zero-Covid policy was lifted that has helped it to reduce the operating loss, “the relatively slow restoration of international flights, oversupply in the domestic market, significant depreciation of RMB and fluctuations in the high oil price” place the airline “still under great operating pressure and suffered an operating loss in the first half of 2023.”
Combined RPKs were up 125.8 percent year on year for the first six months. Passengers carried increased by 118.6 percent to 65 million. Capacity in available seat kilometers was up by 92 percent to 144 million, of which 15.3 million was on international routes.
Air China is expecting an HY1 loss of between RMB -3.2 and 3.9 billion, which is also a significant improvement over last year’s RMB -19.4 billion. Domestic, regional, and international RPKs have increased by 186.5 percent to 95.5 million, and ASKs by 150.7 percent to 135 million. Passengers carried grew by 170.4 percent to 58.6 million.
The Big Three will release definitive results in August.
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