China’s three major state-owned airlines all reported losses in the first half of this year, despite Beijing implementing various preferential policies. However, the international travel recovery rate is still lower than expected.
According to Reuters, the three major airlines in China – Air China, China Southern Airlines, and China Eastern Airlines – last reported annual net profits in 2019, before the spread of the COVID-19 pandemic.
Air China reported a net loss of 2.78 billion yuan (392 million US dollars) in the first half of this year, compared to a loss of 3.45 billion yuan in the same period last year.
The company stated that its international passenger traffic had shown some growth in the first half of the year, with passenger numbers exceeding 80% of the pre-pandemic levels in 2019. However, the recovery rate of its traditionally “advantageous” North American routes has been slower.
Flight schedule data from Cirium and Chinese aviation data provider VariFlight show that flights between China and the United States have been hindered by political factors and low demand, with the current flight volume only about one-fifth of that in 2019.
Based in Guangzhou, China Southern Airlines reported a net loss of 1.23 billion yuan in the first half of the year, compared to a loss of 2.9 billion yuan in the same period last year.
Since the lifting of pandemic-related restrictions at the beginning of 2023, Chinese travelers have been cautious due to the economic downturn, leading to a slower-than-expected recovery in overseas travel.
China Eastern Airlines, based in Shanghai, announced on Friday that its mid-year performance showed a significant reduction in losses of 3.49 billion yuan compared to the same period last year, while the loss forecast for the first half of the year was 2.9 billion yuan.
In order to attract international tourists to China, Beijing has implemented various preferential policies since December last year, including visa waivers for more than ten major European countries. This was expanded to include countries like New Zealand and Australia starting from July 1 this year.
Furthermore, the 144-hour transit visa-free policy now covers 37 ports and is applicable to citizens of 54 countries, including the United States, Canada, and the United Kingdom.
However, the effectiveness of these measures has been limited, with the number of foreign visitors entering China far from recovering to 2019 levels. According to Cirium data, outbound flights from China in July were down 23% compared to the same period in 2019.
Huang Songshan, Director of the Tourism Research Center at Edith Cowan University in Australia, suggested that part of the reason for this situation may be attributed to “changes in the global geopolitical landscape”.
He pointed out that a survey conducted by the Pew Research Center in 2023 showed that most people in Western countries have a negative view of China. The Chinese government’s increased control over society may make foreign visitors in China uncomfortable.
As tourism demand remains weak, foreign competitors are hesitant to enter the Chinese market. Foreign airlines, led by British Airways and Qantas Airways, are canceling or choosing not to restart flights to China after the pandemic.
John Grant, senior analyst at travel data company OAG, stated that “Chinese airlines’ costs are typically 30% lower than those of international competitors.”
According to Taiwan’s Economic Daily News, Lin Zhijie, an insider in the mainland civil aviation industry, stated that the challenge for Chinese airlines to achieve profitability for the whole year remains significant. “The main reason is that the industry’s capacity exceeds demand. Flight volumes continue to increase, but the market has not recovered, leading to a price war.”
He further pointed out that especially after the retaliatory travel demand from last year has passed, this year’s peak season has been lackluster. Several airlines have reported losses during this year’s Labor Day holiday, which is unprecedented.