Domestic airlines have released their semi-annual performance forecasts and they all expect substantial improvements in their results. After the largest loss in history last year, state-owned carriers Air China, China Eastern and China Southern have greatly reduced their losses. Private carriers, Spring Airlines and Juneyao Airlines carried forward their profitability from the first quarter.
For a long time, the main factor affecting airline profitability has been the depreciation of the renminbi against the US dollar. Airlines rely on dollar settlement and are particularly sensitive to currency fluctuations. In the first half of 2022, the three major carriers collectively incurred a net foreign exchange loss of 5.7 billion yuan (US$800 million).
Slow recovery of international routes is another reason Wide-body aircraft designated for international routes operated domestic flights, leading to an oversupply of domestic capacity. Seat occupancy and ticket prices have struggled to recover. Utilization and occupancy remain about 10 percent less than in 2019.
Among the few to make a profit, Spring Airlines stands out.
While other airlines made losses in 2021, Spring Airlines had already turned losses into gains, with a full-year profit of 39 million yuan. With no wide-body aircraft or intercontinental routes, Spring Airlines focuses on Southeast Asia, Japan and South Korea. As demand recovered its strong profitability came from its low-cost, high-efficiency model.
