Three Major State-Owned Airlines of China Report Fifth Consecutive Year of Losses
Facing intense competition in the domestic market, subdued demand for international and business travel, challenges in the supply chain, and currency devaluation, the three major state-owned airlines of China announced this week that they have incurred losses for the fifth consecutive year.
Despite the global aviation industry returning to profitability in 2023, the recovery of China Southern Airlines, Air China, and China Eastern Airlines has been difficult post-pandemic to achieve financial balance.
However, compared to the losses in 2022, the annual losses of the three major airlines have significantly reduced.
Although China’s domestic capacity has surpassed that of 2019, the slow pace of resuming international flights continued until early 2023, lagging behind other regions in the world.
Data from Flight Master and aviation data analysis company Cirium indicates that economic pressure within China and political tensions with other nations have also restrained international travel, with international capacity in March still about 20% lower compared to the same period in 2019.
China International Airlines stated that the company is facing “relatively significant industry competitive pressures,” particularly in the domestic market where airlines are still utilizing large wide-body aircraft typically used for international routes.
However, Cirium data reveals that domestic capacity growth is slowing down, dropping by 1.7% in March compared to the same period last year.
DBS Bank mentioned that they have tempered their optimism regarding the profit recovery of Chinese airlines. Analyst Tabitha Foo stated, “Facing consumer price sensitivity and broader macroeconomic uncertainty, pressure on passenger revenue still exists.”
China International Airlines owns approximately 930 aircraft, reporting a net loss attributable to shareholders of 230 million RMB (31.66 million USD) in 2024, an improvement from the 1.04 billion RMB loss in 2023 and the 39 billion RMB loss in 2022.
In terms of capacity, China’s largest airline, China Southern Airlines, reported a loss of 1.77 billion RMB for 2024 compared to the 4.14 billion RMB loss in 2023.
China Southern Airlines mentioned in January that due to the relatively slow recovery of international markets, significant increases in aircraft component prices, and currency devaluation, the company is under immense operational pressure. Looking ahead, the airline expressed concerns about the unstable global economic growth.
For the first nine months of 2024, both Air China and China Southern Airlines recorded net profits of 1.36 billion RMB and 1.97 billion RMB, respectively. However, they still ended the year with operational losses, indicating significant challenges in the last quarter.
Based in Shanghai, China Eastern Airlines reported a 4.2 billion RMB loss in 2024, an improvement from the 8.17 billion RMB loss in 2023. China Eastern Airlines stated that in 2024, the Chinese civil aviation industry still faces immense operational pressure.
Asian airlines have had a consistent demand for travel, but as airlines continue to recover seat capacity, ticket prices are gradually decreasing from the historical highs during the pandemic.
Representing ticket prices, the annual passenger revenue yield for China Southern Airlines decreased by 12.7%, and for Air China, it dropped by 12.4%.
Flight Master data based in China revealed that the average fare for domestic business class in 2024 decreased by 12.1% year-on-year to 767 RMB, approximately 105 USD, squeezing profit margins.
According to the International Air Transport Association, China accounts for over 40% of passenger traffic in the Asia-Pacific region.
Data from ForwardKeys showed that in 2024, international ticket prices in China decreased by 32% compared to 2023, while international ticket prices across Asia declined by 12%.
HSBC mentioned in January that given the soft consumer economy in China, any attempts by airlines to raise ticket prices could potentially dampen the momentum of travel.