Travel Demand Booms in First Half of Year, Major Airlines Expected to Lose Money
The civil aviation industry is experiencing a boom in travel demand in the first half of the year. However, despite this surge in demand, the three major airlines are still expected to lose money. The industry remains optimistic, though, as it anticipates both volume and price to rise in the second half of the year.
According to a report from the Associated Press, seven A-share airlines have announced their semi-annual performance forecasts. Spring Airlines and Juneyao Airlines have been able to maintain a state of turning losses into profits. On the other hand, HNA Holdings has continued to incur losses, with their second-quarter performance being another setback. Despite this, all three major airlines and China Airlines have achieved a reduction in year-on-year losses. Industry insiders believe that the long holiday period in the second half of the year will be a turning point, speeding up the process of recovery for airline companies.
Flight Steward data indicates that, in the first half of this year, civil aviation passenger flights operated 2.317 million sorties, which is equivalent to 89.7% of the flights operated in 2019. Domestic travel has shown greater recovery at 103.4%, while international travel has only recovered to 25.2% of pre-pandemic levels. The total number of passengers has also seen an increase of 13.8% compared to the same period last year, reaching 88.1% of 2019 levels. Domestic passengers have recovered to 97.6%, while international passengers only reached 23.6%. In June, international passenger traffic was close to 40% of the volume seen in 2019.
When looking at the performance of various airlines in the first half of the year, Spring Airlines and Juneyao Airlines were able to turn their losses around. However, Juneyao Airlines experienced increased financial expenses due to the depreciation of the RMB exchange rate, resulting in a negative net profit for the second quarter. Similarly, HNA Holdings also incurred a loss in the second quarter, mainly due to financial exchange losses. Their total losses for the first half of the year amounted to 2.5-2.8 billion yuan.
The three major airlines reported a total loss of net profit attributable to the parent company of 11.2 billion to 14.1 billion yuan in the first half of the year. The losses in the first quarter were around 8.6 billion yuan, which narrowed to 2.6 billion to 5.5 billion yuan in the second quarter.
Despite these losses, there are positive signs of recovery for the airline industry. A total of 15 airlines operated more than 100,000 flights in the first half of the year, with recovery rates ranging from 75.2% to 105.4% compared to 2019. Spring Airlines reported an increase of more than 40% in available seat kilometers invested in domestic routes compared to the same period in 2019. The company’s passenger load factor reached 91.32% in June. International and regional routes are also steadily recovering, with available seat kilometers on these routes reaching nearly 50% of 2019 levels in the second quarter.
Looking ahead to the second half of the year, industry experts anticipate further growth in volume and price during the summer sports and the National Day and Mid-Autumn Festival holidays. Many airlines have already increased their capacity, and some have even exceeded their 2019 levels. For example, China Eastern Airlines’ passenger seat kilometers have recovered to 102% of the summer transportation level in 2019. Hainan Airlines expects to have an average daily flight volume of over 800, with domestic flights increasing by nearly 110%.
During the summer travel season, the average domestic air ticket price (excluding tax) was about 1,244 yuan, representing a 37% increase compared to the same period last year. Passenger traffic volume on domestic routes exceeded 19 million, and the number of passenger flights exceeded 140,000, recovering to about 105% of 2019 levels from July 1st to 11th.
However, industry insiders caution that the rapid recovery of flight volume and passenger load factor still limits the growth of airline performance. Only when these factors return to pre-pandemic levels will the airline industry be able to further accelerate the process of turning losses into profits.
As the summer travel season continues and with the anticipation of increased travel during the upcoming holidays, the airline industry remains hopeful for a successful recovery in the second half of the year.