China’s four major airlines, Air China, China Southern Airlines, China Eastern Airlines, and Hainan Airlines, have released their semi-annual reports showing an expected combined loss of up to 8.1 billion yuan in the first half of the year. Industry experts believe that the aviation industry’s operating conditions in the second half of the year remain pessimistic, making it challenging to achieve profitability for the full year.
Recently, several listed airlines in China have successively published their financial reports for the first half of 2024. Among them, Air China and China Eastern Airlines are projected to incur losses ranging from 2.3 billion to 3 billion yuan, and 2.4 billion to 2.9 billion yuan, respectively. While China Southern Airlines and Hainan Airlines Holdings, which reported profits in the first quarter, are also expecting losses – with China Southern Airlines forecasting a loss of 1.06 billion to 1.58 billion yuan and Hainan Airlines Holdings expecting a loss of 0.6 billion to 0.67 billion yuan.
However, among the airlines that disclosed their financial reports, three privately-owned listed airlines have anticipated profits. Spring Airlines expects a net profit attributable to shareholders of 1.29 billion to 1.34 billion yuan, Juneyao Airlines forecasts a net profit of 0.45 billion to 0.55 billion yuan, and Xiamen Airlines anticipates a profit of 0.22 billion to 0.32 billion yuan.
Overall, the performance of airlines in the second quarter was generally lower compared to the first quarter, attributed to the traditional low season for civil aviation.
Regarding the reasons for the industry losses of the four major airlines, Lin Zhijie, an industry insider, analyzed to the Chinese media outlet “First Financial” that the fierce competition from high-speed rail is a crucial factor. Yet, the fundamental issue lies in insufficient market demand. After revenge travel last year, the market has returned to rationality, where people now only travel if flight tickets are cheap, marking a significant shift in consumer behavior this year.
Furthermore, international routes have yet to recover to pre-2019 levels. Data shows that in 2023, international air passenger traffic had only reached 81.7% of the levels from the same period in 2019. The lack of operations on international routes has led many wide-body aircraft originally designated for long-haul international routes to be redirected to the domestic market in China, affecting ticket prices, aircraft utilization rates, and load factors for airlines.
Among Chinese airlines, Air China, China Eastern, China Southern, and Hainan Airlines, with a significant share of international routes and a higher number of wide-body aircraft, have been more severely impacted by the slow recovery of the international market, resulting in more significant losses.
Regarding profit expectations for the aviation industry in the second half of this year, several aviation experts expressed pessimism to “First Financial.” Lin Zhijie stated that challenges lie ahead for domestic airlines to achieve profitability for the full year, primarily due to the current oversupply of capacity in the industry. With flight volumes continuing to increase but the market recovery lagging, airlines are caught in a price war.
According to ticket price data provided by the Civil Aviation Travel Services platform “Flight Travel,” the average price of domestic flight tickets from July 11 to August 31 is about 1012 yuan, a decrease of approximately 8% compared to the same period last year. Similarly, the average price of international flight tickets has also dropped by about 6%.
Zou Jianjun, a professor at the Civil Aviation Management Cadre Institute in China, believes that the aviation transport market in 2024 may not show a particularly optimistic performance, with the third quarter potentially proving to be less satisfactory than hoped.