Reporter Wu Jing and Lu Zhikun report from Beijing
Since last year, the mainland's civil aviation industry has recovered rapidly, driven by the recovery of cultural tourism and the popularity of summer transportation, the performance of most airlines has achieved remarkable results.
Recently, Air China (601111. SH), China Eastern Airlines (600115. SH), China Southern Airlines (600029. SH) has released its 2023 performance reports, and although none of them have turned losses into profits, their operating performance has improved significantly year-on-year. The total loss of the "three major airlines" was about 95.3 billion yuan, and the loss margin has shrunk by nearly 90% year-on-year.
The reporter of "China Business Daily" learned that the current recovery of international flights is still an important factor that plagues the profitability of the three major airlines, and it is also an important starting point for the "three major airlines" to turn around their losses this year.
All three major airlines reduced their losses significantly
According to the recently disclosed financial report, the three major airlines achieved a total revenue of 414.8 billion yuan, an increase of 122.91% year-on-year, an increase of 0.82% over 2019, and a total net loss of 13.423 billion yuan, a decrease of 95.267 billion yuan from 2022, a year-on-year decrease of 87.65%.
Among them, China Eastern Airlines lost the most among the three major airlines, achieving annual revenue of 113.74 billion yuan, a year-on-year increase of 145.6%, and net profit attributable to the parent company of -8.17 billion yuan, compared with a net loss of 37.356 billion yuan in the same period last year.
Air China reduced its losses the most among the three major airlines. In 2023, Air China achieved revenue of 141.10 billion yuan, a year-on-year increase of 166.7%, and net profit attributable to the parent company of -1.05 billion yuan.
It is understood that from the perspective of passenger recovery, due to the recovery of demand and the consolidation of Shandong Airlines, Air China's domestic route capacity increased by 127.3% year-on-year last year, and the international route increased by 916.6%. Last year, the company achieved passenger revenue of 130.52 billion yuan, a significant increase of 241% year-on-year.
In addition to the recovery in passenger traffic, Air China's sharp loss last year also benefited from its stake in Cathay Pacific Airways (0293. HK) performed well. It is understood that last year, Cathay Pacific achieved a net profit of 8.16 billion yuan attributable to the parent company, and Air China correspondingly recognized an investment income of 2.43 billion yuan, thereby driving the company to achieve a total investment income of 3.05 billion yuan. The reporter sent an interview letter to Air China on whether it would increase its stake in Cathay Pacific this year, but did not receive a reply as of press time.
In contrast, China Southern Airlines' performance last year was affected by its strategic investment in Sichuan Airlines. It is understood that China Southern Airlines will achieve revenue of 159.929 billion yuan in 2023, a year-on-year increase of 83.7%, and net profit attributable to the parent company of -4.209 billion yuan, compared with a net loss of 32.682 billion yuan in the same period last year.
At the end of last year, China Southern Airlines announced that it would increase its capital in the same proportion as the remaining four shareholders of Sichuan Airlines, of which China Southern Airlines would contribute 4.68 billion yuan in cash and physical assets in stages. According to the latest financial report, China Southern Airlines' investment loss in Sichuan Airlines last year reached 2.34 billion yuan, resulting in an investment income of -1.69 billion yuan that year, dragging down the company's performance.
In addition, the high oil price is also an important reason for the increasing operating pressure of major airlines. For example, last year, the operating cost of China Southern Airlines increased by 39.41% year-on-year to 147.582 billion yuan, of which the cost of aviation fuel increased by 59.33% year-on-year to 52.05 billion yuan.
Air China also disclosed in its financial report that the supply of international routes gradually increased last year, and although the freight rate fell, it was still significantly higher than the level of the same period in 2019. Under this influence, the company's passenger kilometer revenue last year was 0.609 yuan, a year-on-year decrease of 3.96%.
It will take time for international flights to be restored
Last year was a year of recovery and development of China's civil aviation industry, during which the industry completed a total transportation turnover of 118.83 billion ton-kilometers and 620 million passenger trips, an increase of 98.3% and 146.1% year-on-year, respectively, and recovered to 91.9% and 93.9% in 2019, respectively.
However, the slower than expected recovery of international flights, the oversupply of domestic flights, and the rise in oil prices are still important factors plaguing the profitability of the three major airlines.
According to data from the Civil Aviation Administration of China, by the end of 2023, the mainland's international scheduled passenger flights will resume to about 4,782 flights per week, only 62.8% of 2019 levels.
As the airline with the highest proportion of international routes among the three major airlines before 2020, Air China's performance was under pressure due to the weaker than expected recovery of international routes last year. According to the financial report, last year, the RPK (passenger turnover) and ASK (passenger capacity) of its domestic routes reached 128% and 142% respectively in 2019, and the domestic passenger load factor recovered to 74.5%, a decrease of 7.93 percentage points compared with 2019, while the RPK and ASK of international routes were only 37% and 44% of 2019.
China Eastern Airlines also said in its annual report: "Overall, China's civil aviation transport production showed a steady recovery last year, but due to the continued international geopolitical tensions, global economic development, and limited recovery of civil aviation support capacity in some countries and regions, the recovery of international passenger transport is still less than expected." ”
It is understood that since last year, China has successively introduced measures including transit visa-free, unilateral and two-way visa-free, etc., to continue to promote the growth of the international air passenger market.
According to the forecast of the Civil Aviation Administration, it is expected that in 2024, the whole industry will complete 136 billion ton-kilometers of total transportation turnover, passenger traffic and cargo and mail transportation, 690 million passengers and 7.6 million tons, an increase of about 14.4%, 11.3% and 3.3% year-on-year respectively. Among them, the recovery of the international passenger market will be accelerated, and it is expected to reach about 6,000 flights per week by the end of 2024, recovering to 80% of 2019.
According to the estimation of Flight Steward, in March 2024, the number of international passenger flights of civil aviation will be about 44,000, recovering to 69.5% of the same period in 2019 and an increase of 1.8% from the previous month; Among the top 20 navigable countries, South Korea, Japan and Thailand ranked the top three, among which South Korea had the highest recovery rate of 82.8%, while flights from Singapore, the United Arab Emirates, the United Kingdom, Italy, Qatar and Turkey exceeded the same period in 2019, while the recovery of flights in the United States remained at a low level of only 20.1%.
This year, the three major airlines have taken the resumption of international routes as an important starting point for their performance to turn around. At the recent performance briefing, Wang Zhen, director of the Marketing Management Committee of China Southern Airlines, said that China Southern Airlines will focus on the "Belt and Road" initiative, the construction of the Guangdong-Hong Kong-Macao Greater Bay Area and other national strategies, as well as the deployment of the civil aviation work conference, and actively seize the opportunity of the recovery of the international market, and it is expected that the number of international flights will recover to more than 80% in the summer and autumn peak season of 2024.
With the arrival of the summer aviation season, major airlines have increased their investment in international routes. At the beginning of the new season, the average number of international flights scheduled by the Middle East Airlines was 978 per week, and the number of regional flights was 264, which recovered to 88.7% and 99.2% of 2019 levels, respectively. Among them, the number of flights to Europe, Oceania, the Middle East and other places has exceeded the level of 2019, and the routes to Hungary, Spain, Dubai, Malaysia and other countries have far exceeded the level before 2020, more than double the level of 2019.
In addition, China Southern Airlines plans to open and resume more than 40 new routes, including more than 20 international routes, and add routes from Beijing Daxing-Tehran and Riyadh. Air China has also added flights from Beijing to Budapest, Athens, Geneva, Barcelona and Vienna.
(Editor: Lu Zhikun Review: Tong Haihua Proofreader: Zhai Jun)