China’s largest airlines have biggest slump in earnings since 2008 crisis with industry predicting worse to come
- Earnings at Air China, China Southern, China Eastern collapsed last quarter amid pandemic as travel demand evaporated
- Hope on Labour Day recovery may be short-term respite as China Southern sees more negative impact in fist half results
Air China, China Southern Airlines and China Eastern Airlines reported combined losses of 14 billion yuan (US$2 billion) in the three months ended March, deteriorating from 7.4 billion yuan of profits a year earlier, according to results published late Wednesday.
“The losses in the first quarter is huge, so it would be challenging for them to make up for it in the remaining quarters,” said Toliver Ma, analyst at Guotai Junan Securities. Prolonged travel bans would further hammer their international routes, while domestic restrictions would also limit their recovery, he added.
Air China, the nation’s flag carrier, posted a first-quarter loss of 4.81 billion yuan, reversing from a profit of 2.72 billion yuan last year. China Southern Airlines, which operates the country’s largest fleet of aircraft, including the Airbus A380 superjumbo on domestic flights from Beijing to Guangzhou, swung to a loss of 5.3 billion yuan from 2.65 billion yuan in profit. China Eastern Airlines, based in Shanghai, swung to a 3.9 billion yuan loss from a 2 billion yuan profit.
China’s aviation industry shrinks as pandemic triggers US$5.6 billion in first-quarter losses
The carriers each reported more than a 40 per cent slide in revenue as they shrank their capacity to adapt to a slump in travel demand. China’s aviation industry, comprising airlines, ground handling services and catering, incurred a cumulative loss of 39.8 billion yuan in the first quarter, the government said earlier this month.
“If the impact of novel coronavirus pandemic extends to the next quarter, we predict the company’s results from the start of this year to the next reporting quarter will be affected greatly,” Air China said in its earnings statement.
Coronavirus: Asia’s airports at ‘rock bottom’ as number of passengers plummets 95 per cent
Last February, the government effectively put HNA Group under de facto state ward by appointing two government agencies and a regulator to its board in a turnaround attempt, amid speculation the three biggest carriers will help fix the growing problems.
HNA’s flagship carrier Hainan Airlines, lost 6.3 billion yuan in the first quarter compared with a 1.1 billion yuan profit a year earlier, its worst report card since at least 2003.
The Chinese carrier is not alone. At least seven airlines including German carrier LGW, Virgin Australia, Air Mauritius and units of Norwegian Air have filed for court protection in April, according to media reports, following after the collapse of Flybe in early March.
The control in the pandemic in mainland China is showing a positive trend, aiding a nascent recovery in domestic travel, China Southern Airlines said in a statement. Yet, international traffic has continued to slip, and it expects “relatively big and negative impact” to results in the first half.
“There’s definitely a recovery, but the recovery is coming very slowly,” said Ivan Su, an analyst at Morningstar. “Even though we may have a good Labour Day numbers, things might not continue the upwards trend after that” given the viral outbreak elsewhere, he said.