News Backgrounder
“Earnings stress” to continue into 2025 at China’s Big 3 airlines
October 1st 2024
Leading Asian bank, HSBC, has predicted the bottom lines of China’s three largest state-owned airlines will most likely remain in the red to year-end due to “a decline in air fares and rigid fixed costs and domestic and international over-capacity”. Read More »
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“Air ticket prices will trend down sequentially in the fourth quarter for domestic and international routes from overcapacity, but more importantly falling consumption and economic uncertainties in China,” HSBC said in a note on October 31.
It continued: “Data shows air fares fell rapidly post Golden Week (GW) from October 1-October 28, with average prices down 11% against GW for domestic routes and 23% lower for international flights.”
Despite foreign carrier complaints that the Mainland’s international airlines benefitting from shorter flying times through Russia than they do, HSBC said that if the return of foreign airlines speeds up it is likely to cap fares for the Big 3, especially as they are carrying excess capacity.
CSA will have a results cushion from the booming e-commerce business out of China, HSBC forecast, with the Mainland’s largest airline forecast to return to profit in 2025. Air China has a similar cushion as a result of its 30% equity in now profitable Cathay Group, helped by the Hong Kong airline’s robust cargo business, the research note said.
It added: “Air China and China Eastern could remain loss-making as we think their weaker cost management could dent profitability.”
