By XUE Bingbing
After suffering the largest-ever losses in the previous year, China's three major state-owned airlines have managed to reduce their losses in the first half of this year.
Air China reported a net loss of 2.45 billion yuan (US$337.37 million) , marking a significant decrease of 16 billion yuan from previous losses. Meanwhile, China Eastern Airlines faced the most substantial losses among the trio, incurring a net loss of 6.25 billion yuan, nearly equal to the combined losses of Air China and China Southern Airlines for the same period. All three carriers have cited slower-than-expected international flight recovery, Chinese yuan depreciation against the US dollar, and oil price fluctuations as key reasons behind their losses in their interim reports.
In H1, Air China made headlines with its acquisition of Shandong Airlines, adding 133 aircraft to its fleet and securing its position as China's largest airline by fleet size, with a total of 902 aircraft.
Surprisingly, Shandong Airlines also posted a commendable financial performance, reporting a net profit of 357 million yuan for the period. Cathay Pacific, previously a drag on Air China's performance, managed to turn a profit in the first half of this year.
Air China boasts the highest proportion of international routes among the three carriers. During the pandemic, reduced international flights led to higher international airfare prices, benefiting the airline. The revenue passenger kilometer (RPK) from international routes doubled, achieving nearly a 300 percent increase within two years. However, with increased international flight capacity this year, ticket prices have stabilized, signaling the end of windfall profits from international routes. Nevertheless, the growth in flight volume and load factor compensated for the price decline, resulting in Air China's international passenger revenue in H1 2023 reaching 6.72 billion yuan, a 473.62 percent increase compared to the same period last year.
Despite having the smallest fleet size among the three major airlines, China Eastern Airlines performed impressively during the first half of the year, matching Air China and China Southern Airlines in terms of passenger volume, load factor, and PRK.
China Southern Airlines sustained the least losses among the trio, boasting the lowest cost per available seat kilometer (cost per ASK) and the highest flight punctuality rate.
However, the airline's primary challenges are centered around Beijing Daxing International Airport hub and the Greater Bay Area market.
Although China Southern aims to establish Beijing Daxing International Airport as its northern hub, its distance from the city center makes it less appealing to business travelers compared to Beijing Capital International Airport, leading to lower ticket prices overall. Furthermore, Daxing Airport positions itself as an international aviation hub, but the recovery of China's international aviation market has been slow, making it challenging to increase flight volume in the short term. In addition, the Greater Bay Area, where China Southern's headquarters is located, is crucial for the airline, but it faces stiff competition as multiple airlines enter the market. In H1 2023, China Southern implemented several preferential policies tailored to the Greater Bay Area market to solidify its foothold and enhance its market control.