On the evening of July 15, the three major domestic airlines, China Southern Airlines (SH600029, stock price of 6.79 yuan, market value of 115.1 billion yuan), Air China (SH601111, stock price of 10.31 yuan, market value of 149.8 billion yuan), China Eastern Airlines (SH600115, stock price of 4.97 yuan, The market value of 93.8 billion yuan) has disclosed the announcement of pre-loss in the semi-annual performance of 2022. According to the reporter’s statistics, the total pre-loss of the three major airlines in the first half of the year exceeded 45 billion yuan, which has exceeded the loss for the whole year of last year.
The three major airlines all mentioned that repeated epidemics, rising oil prices and exchange rate fluctuations are the main reasons for the large losses. At present, China is in the peak season of summer transportation, and many institutions have stated that the peak season of summer transportation is expected to catalyze the concentrated release of air travel demand. In addition, the Civil Aviation Administration of China has recently introduced a number of relief policies, among which the three major airlines will each strive to inject 3 billion yuan. Can the civil aviation market bottom out in the second half of the year?
The three major airlines have a total pre-loss of more than 45 billion yuan in the first half of the year
According to the announcement of China Southern Airlines, according to the preliminary calculation of the company’s financial department, it is expected that the company will lose money in the first half of 2022, and the net profit attributable to the parent will be -10.2 billion to -12.1 billion. The company also stated that during the reporting period, the domestic civil aviation industry was affected by multiple shocks such as repeated epidemics, high oil prices, and depreciation of the RMB; in the first half of 2022, the company’s capacity investment and revenue passenger kilometers decreased by 34.3% and 42.6% year-on-year, respectively, compared with the same period in 2019. The ratios decreased by 54.8% and 64.8% respectively.
Air China announced that it is expected that the net profit attributable to the parent in the first half of 2022 will be -18.5 billion to -21 billion yuan. The company said that in the first half of 2022, due to the continued impact of the new crown epidemic, the global aviation industry as a whole was still in a state of loss, especially since the domestic epidemic has spread in many places since this year, resulting in a substantial reduction in domestic airline investment, and international airline investment continues to be limited. In addition, rising oil prices and exchange rate fluctuations further aggravated the difficulty of improving the company’s efficiency, and the operating performance of investment companies related to the main business was also affected.
China Eastern Airlines announced that it is expected that the net profit attributable to the parent in the first half of 2022 will be -17 billion yuan to -19.5 billion yuan. The company also said that the company, headquartered in Shanghai, has experienced severe challenges from the impact of the epidemic. At the same time, the sharp rise in international oil prices and the depreciation of the RMB against the U.S. dollar have further aggravated the company’s cost pressure.
The reporter of “Daily Economic News” noted that the three major airlines have accumulated pre-loss of over 45 billion yuan in the first half of 2022, and in 2021, the three major airlines will have a cumulative loss of about 41 billion yuan.
More than two years after the outbreak of the new crown epidemic, the civil aviation industry has not yet gotten out of the predicament. Recently, at the national civil aviation mid-year work teleconference, Song Zhiyong, director of the Civil Aviation Administration of China, pointed out that due to the repeated impact of the epidemic, civil aviation transportation production fell to a trough in the first half of the year, with only 2,967 flights per day at the lowest level, only 17.8 in the same period in 2019. %, and the overall loss reached 108.9 billion yuan.
At noon on July 16, civil aviation expert Lin Zhijie told the “Daily Economic News” reporter through WeChat that the civil aviation industry lost hundreds of billions in the first half of this year, exceeding the amount of losses in 2020 and 2021. “There are several reasons. The first is the impact of the epidemic. The second is that oil prices have reached a new high. The price of aviation kerosene has exceeded 10,000 yuan. The third is the loss caused by the devaluation of the renminbi.” Qi said.
Can the civil aviation market bottom out in the second half of the year?
After the “darkest moment” in the first half of the year, can the civil aviation market see a bottoming out in the second half of the year?
In order to help the civil aviation industry get out of the predicament, the Civil Aviation Administration has issued relief policies including financial credit, financial support, tax reduction and exemption. Recently, at a press conference held by the Civil Aviation Administration, the relevant person in charge stated that the Civil Aviation Administration, on the basis of implementing 65.6 billion yuan in emergency loans for airlines and airports, will strive for an additional 150 billion yuan in emergency loans for airlines; in terms of financial support, The Civil Aviation Administration of China strives to inject 3 billion yuan for each of Air China, China Eastern Airlines, and China Southern Airlines, 2 billion yuan for Capital Airport Group, and 3.29 billion yuan for the first batch of central subsidy funds for domestic passenger flights. 12.5 billion yuan of corporate value-added tax credits and refunds.
At present, China is in the peak season of summer transportation, and many institutions have stated that the peak season of summer transportation is expected to catalyze the concentrated release of air travel demand. A recent research report from Zhongtai Securities pointed out that the number of flights and aircraft utilization continued to improve on a week-on-week basis, and domestic routes ushered in a large-scale return to service, confirming the upward trend in demand recovery; after the college entrance examination, the summer season is expected to catalyze demand for air travel. Concentrated release; the marginal improvement of weak aviation demand is more certain, and the bottom of demand has already been seen in the second quarter, and both international and domestic demand will usher in a rapid rebound in demand, and the recovery of aviation in the third quarter may exceed expectations.
In addition, in early July, the three major airlines announced that they had signed a purchase agreement with Airbus. The three companies purchased a total of 292 A320NEO series aircraft, and the total purchase amount will reach 37.257 billion US dollars. This transaction is the first large-scale passenger aircraft order announced by the domestic civil aviation industry in the past three years. The three major airlines all said that this aircraft transaction is in line with the company’s “14th Five-Year Plan” development plan and market demand. Based on the confidence in the future development of the civil aviation industry, the company needs to plan and reserve the fleet capacity in advance, optimize the fleet structure and Long-term capacity replenishment.
Regarding the business situation of the civil aviation industry in the second half of this year, Lin Zhijie analyzed that the first half of the year was a V-shaped recovery, from 17% in early April to 71% in early July, an increase of 54 percentage points in two months; Recently, the industry has faced the test of the spread of the epidemic, superimposed with record-breaking oil prices, so the operating situation in the second half of the year is still severe.
“It is expected that the recovery rate of the industry will drop in the future, and it may show a W-shaped recovery trend.” Lin Zhijie said.
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