Bumper profit bounce at region’s leading airlines

August 1st 2023

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In the first week of this month, China Airlines announced the second highest interim profit in its history. Read More » A few days later, Cathay Pacific Group reported a HK$4.3 billion (US$547.7 million) first-half profit against a HK$5 billion loss a year ago.

These healthy results were preceded by announcements or positive profit guidance from the region’s leading peer carriers including Air New Zealand and All Nippon Airways, as well as China Airlines, Korean Air, Qantas Group and market innovator, the SIA Group.

At China’s “Big Three” carriers, cobbled until late in the first quarter of 2023 by the country’s closed international border, growth is lagging their regional peers. Nevertheless, they are ascending the recovery curve rapidly, improving overall revenue to break-even point by June, from massive losses in the last three years. HSBC Global Research calculates China Eastern Airlines will report the largest loss for interim 2023, followed by the Mainland’s biggest airline, China Southern Airlines, and Air China.

All Nippon Airways has reported revenue for first quarter 2023, to June 30, producing its first operating profit in the last four years against the matching loss-making quarters of 2020, 2021 and 2022.

“With the expansion in the scale of operations, mainly on international routes, operating revenue increased to 461 billion yen (US$3.353 million) for the three months, approximately 130% higher than the year ago quarter,” the airline said.

Operating expenses were 417 billion yen lower than the same quarter in 2022. But following a global trend, international cargo declined 60% over 2022.

ANA parent, ANA HOLDINGS INC., said strong demand for domestic and international travel resulted in operating income for the reported months of 43.7 billion yen, ordinary income of 43.2 billion yen and net income of 30.6 billion yen, marking the first time in four years ANA HOLDINGS had posted a first quarter profit.

At its announcement earlier this month of an interim net profit of US$547.7 million, the Cathay Group maintained its guidance of a return to full capacity by year-end 2024.

The group’s two carriers, Cathay Pacific and HK Express,
were close to 60% of pre-pandemic capacity in July and remain on track to reach 70% at year-end and 100% in December 2024. In June, before it reported its interim results, the airline group paid a HK$1.5 billion deferred dividend on the 19.5 billion shares held by the Hong Kong government and announced its intention to pay all future preference share dividends as they fall due; signaling the group’s confidence in its recovery.

At China Airlines profits from passenger traffic spiraled upwards by 1,351% in its first half to June 30. Interim operating revenue improved year-on-year by 21.33%, to TWD 89.885 billion (US$2.815 billion). Single quarter revenue came in higher by 28.05%, or TWD47.193 billion. In its most recent results guidance, CAL said “flight frequency will reach 80% of pre-pandemic levels in the year’s second half and routes to Europe, North America and Oceania are back pre-COVID-19 levels”.

The profit picture was more mixed at Korean Air as the airline is impacted by the global fall-off in cargo demand and the subsequent decline in profit margins. The flag carrier’s cargo revenue has collapsed by 56% compared with a year ago as more passenger aircraft belly space has become available, driving down rates. KAL’s preliminary second quarter revenue was 3.5354 trillion won (US$2.693 billion), a 6% annual increase built on strong passenger demand. Operating profit was 36% lower than a year ago, at 468 billion won, from higher operating costs and airport fees, KAL said. The Korean flag carrier forecasts stronger business in second half 2023 from a sustained passenger rebound.

At press time, Qantas Group announced a full-year net profit to June 30 of A$1.74 billion (US$1.1 billion), surpassing the group’s interim profit of A$1.4 billion to December 31, 2022. The group’s year ago loss was A$860 million. At the August 24 results announcement, group CEO, Alan Joyce, confirmed the airline company’s order for 12 A350s and 12 787s with deliveries from 2027.

Across “the pond”, Air New Zealand has posted a net profit of NZ$412 million (US$244 million) for the year to June 30, returning to the black from a net loss of NZ$591 million in the previous year. The flag carrier’s CEO, Greg Foran, said “costs at the carrier continue to rise and the reality is airfares are unlikely to return to pre-pandemic levels”.

At SIA, passenger numbers at its two carriers, Singapore Airlines and Scoot, continue to climb, reaping more record profits for the group.

In late July, SIA Group posted a quarterly net profit of S$734 million (US$581.89 million), up 98.4% from a year ago, and driven by passenger demand in the peak school and holiday season. It was the best performance for a quarter in the group’s history and followed earlier record profits in the second half of 2022-2023.

Group passenger capacity increased by 32.4% from a year ago with SIA and Scoot flying 8.4 million passengers in the quarter, a 65.5% increase over the same months in 2022. Year-on-year passenger and load factors drove growth higher by 49%, out pacing capacity expansion, SIA said.

In August, SIA announced it would “ramp up services” across its network from the end of March to late October next year.

It will restore A380 double daily Singapore-Frankfurt flights, introduce A350-900s from Singapore to Cairns (at four flights a week), fly Singapore-Male and re-instate direct Singapore-Barcelona.

Destinations that will reach or exceed pre-pandemic frequencies will be Ahmedabad, Beijing, Shanghai, Copenhagen, Da Nang, Darwin, Dhaka, Kuala Lumpur, Manchester-Houston, Melbourne, Milan, Perth, Dubai, Tokyo Haneda, Houston, Seattle and Yangon.