China’s four major airlines, Air China, China Southern Airlines, China Eastern Airlines, and Hainan Airlines, have released their semi-annual reports, showing that the four airlines are expected to incur a combined loss of up to 8.1 billion yuan in the first half of the year. Industry experts believe that the business outlook for the aviation industry in the second half of the year remains bleak, making it challenging to achieve profitability for the full year.
Recently, several listed airlines in China have successively published their 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 made profits in the first quarter of the year, are also expected to post losses, with China Southern Airlines projecting a loss of 1.06 billion to 1.58 billion yuan and Hainan Airlines Holdings expecting a loss of 600 million to 670 million yuan.
However, among the airlines that have released their financial reports, three privately-owned listed airlines have forecasted profits. Spring Airlines anticipates a net profit attributable to shareholders of between 1.29 billion and 1.34 billion yuan, Juneyao Airlines expects a net profit of 450 million to 550 million yuan, and Lucky Air projects a profit of 22 million to 32 million yuan.
Overall, the performance of airlines in the second quarter was generally weaker compared to the first quarter, with the industry attributing this trend to the traditional low season for civil aviation during the second quarter.
Regarding the reasons for the industry losses among the four major airlines, Lin Zhijie, an aviation industry expert, analyzed in an interview with a mainland media “First Finance and Economics” that the competition from high-speed rail is a significant factor contributing to the losses of the four companies in the first half of the year. He emphasized that the crucial issue is the inadequate market demand, as the market has shifted from the revenge travel mentality of last year to a more rational approach this year, where travelers are more price-conscious before deciding to travel.
Moreover, international routes have yet to recover to the levels seen before 2019. Data indicates that in 2023, the scale of international air passenger traffic only recovered to 81.7% of the same period in 2019.
The insufficient operation of international routes has led to a situation where many wide-body aircraft intended for international long-haul routes need to be redeployed to the domestic market in China, affecting ticket prices, aircraft utilization rates, and load factors for airlines.
Among Chinese airlines, Air China, China Eastern Airlines, China Southern Airlines, and Hainan Airlines have a higher proportion of international routes and a greater number of wide-body aircraft, making them more severely impacted by the slow recovery in the international market, resulting in more significant losses.
In terms of profit expectations for the aviation industry in the second half of this year, several aviation industry insiders interviewed by “First Finance and Economics” expressed pessimism.
Lin Zhijie stated, “At present, the challenge for domestic airlines to achieve profitability for the whole year is quite significant, mainly due to the oversupply of capacity in the industry. Flight volumes continue to increase, but the market recovery has been sluggish, leading to a price war.” He pointed out that this year’s peak season has been lackluster, with several airlines even incurring losses during the recent Labor Day holiday, a scenario not seen in previous years.
According to air travel platform “Carnoc,” from July 11 to August 31, the average price of domestic flight tickets in China was around 1012 yuan, representing an 8% decrease compared to the same period last year. The average price of international flight tickets also dropped by about 6% year-on-year.
Zou Jianjun, a professor at the Civil Aviation Management Institute of China, believes that the aviation transport market in 2024 may not show a very optimistic performance and that the third quarter might be disappointing.