China’s biggest state-owned airlines reported losses in the first half of the year. They faced a slower-than-anticipated resurgence in foreign travel, local oversupply, and increased rivalry as aviation capacity resumed its global reach.
Prior to the COVID-19 pandemic, the main three airlines in China—Air China, China Southern Airlines, and China Eastern Airlines—last disclosed their yearly net profits in 2019.
Air China, the nation’s leading airline, reported a lower first-half financial loss of 2.78 billion yuan ($392 million) on Thursday. This loss was less than the 3.45 billion yuan it reported during the same period last year.
After posting a loss of 2.9 billion yuan the year before, China Southern Airlines posted net losses of 1.23 billion yuan in the first half of this year. In the first quarter, the Guangzhou-based airline generated a profit of 760 million yuan.
According to Air China, foreign travel increased in the first half of 2019 and passenger numbers exceeded 80% of pre-pandemic levels. However, it said that its formerly “advantageous” North American lines were only slowly getting better.
Flight schedule data from Cirium and China-based VariFlight shows that flights between China and the US are only around a fifth of their 2019 levels. Political unrest and poor demand have caused this decline.
“As international routes are not resumed fully wide-body planes are used domestically, intensifying oversupply,” Air China stated.
Shanghai-based China Eastern, which predicted a first-half loss of up to 2.9 billion yuan last month, will release its interim results later on Friday.
Since the start of 2023, China removed pandemic-related restrictions, leading to increased outbound traffic. However, the rebound in international travel is falling short of market forecasts due to a weakening economy and a shift toward domestic travel.
According to Cirium data, there were 23% fewer flights from China in July than there were in the same month in 2019, but there were 15% more domestic flights. Despite this, Chinese airlines are continuing to gain market share abroad relative to their international competitors.
Planes are taking to the skies again as a global imbalance between seats and travel demand evens out. Airlines around the world are witnessing lower fares and reduced profitability.
In a June note, HSBC analysts stated that plane capacity and visa restrictions are improving. They expected China outbound travel to continue recovering, but noted that the domestic travel market may face pressure as tourists travel overseas.
This week, Air China and China Southern became the country’s second and third airlines to begin flying the COMAC C919 passenger jet, which is manufactured in China.
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